U.S. said to spare some Apple goods from China duties

Jenny Leonard and Saleha Mohsin
Bloomberg News

The Trump administration will spare a category of high-tech products that includes the Apple Watch and AirPods headphone from the next round of tariffs it’s imposing on Chinese goods, according to two people familiar with the matter.

The government is expected to release as early as Monday the final list of as much as $200 billion of Chinese products that will be hit with a new 10 percent tariff, according to five people familiar with the matter. A product code that covers Apple Inc.’s Watch and AirPods – as well as similar smart watches, fitness trackers and other goods made by competitors including Fitbit Inc. – is not on the list, the two people said.

The people asked not to be identified because the new round of tariffs hasn’t yet been announced. Apple and Fitbit didn’t immediately respond to requests for comment.

The product code covers wireless devices, and it was included on a preliminary list the administration released in July. Other Apple products under the code include the HomePod speaker, BeatsWL headphones, and AirPort and Time Capsule internet routers. The value of such imports from China is about $12 billion, according to one of the people.

Apple sold 4.7 million smart watches last year, and Fitbit sold 2.7 million, according to research company International Data Corp.

Apple shares pared losses on the news, moving as high as $220.60 per share after falling to a low for the day under $219. The shares previously fell 0.8 percent after the company said that the Watch and AirPods would be hit by the proposed tariffs.

Fitbit shares rose as much as 4 percent to $5.54 from a low for the day of $5.32.

“Connected devices including fitness trackers and smart watches remain one of the top technology gifts to give and receive during the holidays,” Izzy Santa, a spokeswoman for the Consumer Technology Association, said in an email. She said her organization estimated last year that 67 million American adults planned to buy the devices.

Earlier this month, Apple said a “wide range” of its products would be hit by the proposed tariffs. The company didn’t identify the iPhone as a product that would be subject to duties in a Sept. 5 letter to U.S. Trade Representative Robert Lighthizer.

Apple asked Lighthizer to reconsider imposing the tariffs and instead take other measures that would support the U.S. economy and American consumers.

“Tariffs increase the cost of our U.S. operations, divert our resources, and disadvantage Apple compared to foreign competitors,” according to Apple’s letter. “More broadly, tariffs will lead to higher U.S. consumer prices, lower overall U.S. economic growth, and other unintended economic consequences.”

Plantronics Inc., a headset manufacturer based in Santa Cruz, California, asked Lighthizer to remove the same wireless products code from the tariffs list in an August letter.

Apple Chief Executive Officer Tim Cook – who dined with President Donald Trump and his wife, Melania, at Trump’s Bedminster, New Jersey golf resort in August – has said he hopes “calm heads prevail” in the trade conflict between the U.S. and China. The company’s sprawling production chain is centered in China. Earlier this year, a Chinese Communist Party newspaper named Apple among the American companies that would be “most damaged” if a trade war erupted.

White House economic adviser Larry Kudlow, speaking at the Economic Club of New York on Monday, said the administration frequently consults with Cook and takes his views seriously.

“We’ve spoken to Mr. Tim Cook many times. He’s a really smart guy. He’s given us some good advice,” Kudlow said.

American industry has come out strongly against Trump’s tariffs, saying cost increases could raise prices for consumers.

The administration has revised the list of Chinese goods that will be hit by tariffs following a feedback period and more than a week of public hearings last month. Like Apple, most U.S. businesses that submitted comments were opposed to the tariffs being enacted.