Linked List: April 9, 2025

Wednesday, 9 April 2025

Ben Thompson:

The problem with these tariffs is that their scale and indiscriminate nature will have the effect of destroying demand and destroying the capability to develop alternative supply. I suppose if the only goal is to hurt China then shooting yourself in the foot, such that you no longer need to buy shoes for stumps, is a strategy you could choose, but that does nothing to help with what should be the primary motivation: shoring up the U.S. national security base.

Those national security concerns are real. The final stage of disruption is when the entity that started on the bottom is uniquely equipped to deliver what is necessary for a new paradigm, and that is exactly what happened with electronics generally and drones specifically. Moreover, this capability is only going to grow more important with the rise of AI, which will be substantiated in the physical world through robotics. And, of course, robots will be the key to building other robots; if the U.S. wants to be competitive in the future, and not be dependent on China, it really does need to make changes — just not these ones.

Trump, Supposedly, Thinks the U.S. Has the ‘Resources’ Needed to Make iPhones ★

Chance Miller, writing at 9to5Mac:

Ahead of that, White House Press Secretary Karoline Leavitt said today that Trump firmly believes that Apple can move iPhone manufacturing to the United States. In response to a question from Maggie Haberman of The New York Times about the types of jobs Trump hopes to create in the U.S. with these tariffs, Leavitt said:

“The president wants to increase manufacturing jobs here in the United States of America, but he’s also looking at advanced technologies. He’s also looking at AI and emerging fields that are growing around the world that the United States needs to be a leader in as well. There’s an array of diverse jobs. More traditional manufacturing jobs, and also jobs in advanced technologies. The president is looking at all of those. He wants them to come back home.”

Haberman followed up with a question about iPhone manufacturing specifically, asking whether Trump thinks this is “the kind of technology” that could move to the United States. Leavitt responded:

“[Trump] believes we have the labor, we have the workforce, we have the resources to do it. As you know, Apple has invested $500 billion here in the United States. So, if Apple didn’t think the United States could do it, they probably wouldn’t have put up that big chunk of change.”

Leavitt is referencing Apple’s announcement from February, when it said it would “spend more than $500 billion in the U.S. over the next four years.” Apple’s commitment, however, made zero reference to iPhone assembly in the United States. The press release focused on R&D in the U.S., chip production in Arizona, AI server manufacturing in Houston, Apple TV+ production, and an academy in Michigan.

Also worth reading today is this story from 404 Media, which outlines exactly why an iPhone made in the U.S. is “pure fantasy.”

Another way to think about it is that the iPhone — the iPhone as we know it — can’t really be made anywhere else but China. Apple doesn’t publicly state how many iPhones are made in which countries — shocker that they’d be secretive about that — but estimates peg annual production as being 85–90 percent in China, 10 percent in India, and the remainder in Brazil and Vietnam. Wages aren’t even close to the biggest reason for this. Ultimately the biggest unique factor to the Chinese supply chain is scale. Foxconn’s iPhone factories in China aren’t mere buildings and aren’t really even campuses — they’re more like entire cities unto themselves.

We can joke about US-made iPhones costing $9,000 but the jokes miss the point. If the world were such that all iPhones sold to Americans were made in America, there’s no plausible scenario where iPhone ownership would be commonplace. Let’s estimate that Apple sells 50 million iPhones per year in the US. Apple couldn’t manufacture 50 million iPhones per year in the US at any cost. No amount of money could be thrown at the problem and make it happen that 50 million new iPhones are made in the US in the near future. Apple could make some iPhones here, but not many. And however many they might make would be built using components (displays, chips) that would have to be imported anyway.

Even if Apple were to dramatically raise the price of an iPhone, and even if, somehow, demand for iPhones didn’t drop in the face of dramatically higher prices, Apple simply couldn’t make tens of millions of iPhones here in the US. But of course demand would drop precipitously in the face of higher prices. And a gray market would instantly rise. Because even if Apple, magically, were able to build tens of millions of iPhones in the US, they’d still be building hundreds of millions of them in China — and those Chinese-assembled ones would cost less. I’m imagining an entire cottage industry of bootleggers running Chinese-made iPhones from Canada into the US, and instead of buying iPhones from an Apple Store, people will buy them from the backs of U-Haul trucks. (Gray market bootlegging is inevitable with these tariffs, for every sort of product. If something is cheaper in Canada than it is in the US, someone’s going to smuggle it across the border.)

There simply is no scenario where 50 million Americans per year buy an iPhone for prices they’d be willing to pay without most of them being manufactured by the Chinese supply chain Apple has built.

Trump Cuts Most Tariffs to 10% but Increases Tariffs on China to 125% ★

President Trump, in a post on Truth Social, which is apparently how the world’s financial markets now run:

Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable. Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!

The entire stock market jumped on Trump’s announcement, with the S&P 500 up 8% as I type this. Apple is up 9%, Meta 13%, Nvidia 16%, and Tesla 19%. I’m not sure why though. All Trump seems to have done is switch from waging a trade war against the entire world to a trade war against China. And the 10% tariffs Trump now claims we’re applying to imports from the rest of world are themselves economic nonsense — they only look low compared to the nonsensical rates Trump announced a week ago. We’re at the whims of a mad king. Trying to report this as having any sort of logic in a traditional economic sense is folly. It’s like trying to make scientific sense out of the biblical fable of Noah’s Ark.