South African consumers could soon pay less for their next iPhone than their counterparts in the US, thanks to Donald Trump’s sweeping tariffs.

The US president’s tariff regime, announced last week, has shocked world markets and raised fears they could trigger a global recession.

Trump has said the tariffs – which have drawn almost universal criticism, are meant to address trade imbalances between the US and other nations. But it is US firms and consumers that will be the hardest hit.

“The introduction of a 54% tariff on imports from China into the US will effectively increase the landed cost of goods by more than 50%. The challenge with an increase such as this one is that it is then passed on the consumer, because, even if importers wanted to absorb some of it to protect their customers, this is unlikely on an increase so high,” said Olebogeng Ramatlhodi, indirect tax leader for Africa at Deloitte.

“As one of the biggest importers of iPhones, the US is likely to feel the impact of this. This may drive down sales, ultimately impacting Apple’s sales globally,” he added.

Ramatlhodi said a US distributor importing a smartphone worth US$1 000 from Asia will land the product at approximately $1 650 after duties and freight costs have been factored in. This is assuming the phones did not already attract duties on entry into the US prior to Trump’s bombshell announcement. Sales tax has been excluded from the calculation.

Rand/dollar

Comparatively, iPhone imports into South Africa are subject to a much lower duty, he said. All things being equal, the price increase in US markets could lead to the phones, although they are made by a US company, being more expensive in the US than they are in South Africa. However, Ramatlhodi warned there are other factors at play.

Chief among these is the rand/dollar exchange rate, which is crucial because hardware – like most other commodities – is usually priced in dollars in international markets. The rand depreciated from R18.76/$ in pre-market trading on Friday to R19.56/$ on Tuesday morning. It has weakened even more against the euro. This has meant the cost of importing all goods, including iPhones, into South Africa has risen.

Read: South Africa cuts luxury tax on basic smartphones

But markets with more stable currencies, like Australia for example, where iPhones are also more expensive than in the US, could see that price differential change significantly.

Apple may not be in a position to pass price increases onto its consumers. According to Venter Labuschagne, a partner at KPMG South Africa specialising in customs and excise, market dynamics could force the Californian technology firm to absorb more of the cost than it might like to.

Tariff man … US President Donald Trump. Leah Millis/Reuters

Labuschagne explained that competition could also lead to consumers looking for more affordable alternatives, including Android devices. The US is Apple’s biggest market and the company’s brand loyalty there is strong. But with the new increased tariffs affecting goods across all sectors, including vehicles, home appliances and even food, it means prices for goods in the US are going to rise across the board.

This inflationary effect is going to put US consumers under more strain, leading to increasingly conservative spending patterns.

Apple’s products are marketed as premium, with alternatives from competitors like Samsung, Huawei and Honor often available for cheaper. If Apple hikes prices in the US, it may lose market share, especially to Samsung (the Chinese brands are not widely available in the US market).

Labuschagne said another option Apple has it to negotiate with its suppliers so they absorb some of the costs, too, but that is subject to commercial agreements being reached, which might not be possible.

While American companies and consumers look set endure the brunt of Trump’s tariff wars, the US administration has rationalised its retaliatory tariffs on the basis that it will encourage manufacturers to set up shop on American soil, which, in theory, will lead to the creation of jobs.

Labuschagne described this strategy as shortsighted, since it can take a decade to set up a manufacturing operation, and business has no certainty that these tariffs – or any other incentives – will last beyond Trump’s four-year term in office. “Once those factories are set up, local manufacturers are unlikely to drop the price anyway; they will charge the higher prices consumers are used to paying,” he said.

Mechanising

Another issue challenging the “more jobs” narrative is that manufacturing is mechanising at a rapid pace, with factories relying on automating processes using robots with little human intervention. The unskilled or semi-skilled jobs that may be created may not be suitable for the US market, which has a services-led economy with a relatively high minimum wage compared to other parts of the world.