3 ways a Trump presidency will affect Apple
Silicon Valley figures are already freaking out, but there's one company specifically that soon might find itself in President Trump's crosshairs.
Apple, the world's most valuable company by market cap, was mentioned specifically by Trump several times during his campaign. And Apple CEO Tim Cook actively campaigned for Hillary Clinton, hosting a fundraiser earlier this year and apparently holding a private meeting with the campaign chairman, John Podesta, in 2015.
Institutions around the world are holding emergency meetings to discuss what the ramifications of a Trump presidency are. Here's what Cook and his executive team are likely discussing this morning:
Tax repatriation
It's here that Trump's stated policies might end up working out in Apple's favor. Apple has about $200 billion in cash and marketable securities stashed overseas, and currently, it would have to pay 35% in American taxes to bring it back to the United States.
Trump has proposed slashing the tax rate on income held overseas to 10%, most notably during a speech at the Economic Club of New York in September.
"This wealth that's parked overseas, nobody knows how much it is, some say it's $2.5 trillion, I have people that think it's five trillion dollars. We'll bring it back, and it'll be taxed only at the rate of 10% instead of 35%. And who would bring it back at 35%? Obviously nobody, because nobody's doing it," Trump said.
"The largest beneficiaries of the move would be the big American technology groups," the Financial Times reported on Wednesday.
"Honestly, I believe the legislature and the administration will agree that it's in the best interest of the country and the economy to have tax reform," Cook said in an interview with The Washington Post earlier this year. "And when we bring it back, we will pay 35 percent federal tax and then a weighted average across the states that we're in, which is about 5 percent, so think of it as 40 percent. We've said at 40 percent, we're not going to bring it back until there's a fair rate."
Moodys says that US companies outside the financial sector hold $1.2 trillion overseas. Apple is the largest hoarder.
There is also the possibility that a Trump administration might retaliate against the European Commission, which is alleged to be targeting US businesses to collect taxes.
The European Commission ordered Apple to pay at least $14.5 billion in taxes to Ireland earlier this year. The decision is currently being appealed by Ireland.
American manufacturing
"I'm going to bring jobs back. I'm going to get Apple to start making their computers and their iPhones on our land, not in China," Trump said in March. "How does it help us when they make it in China?"
He continued talking about moving iPhone production to the US throughout his campaign.
However, Trump is not the only president or president-elect to challenge Apple to produce a made-in-USA iPhone. President Barack Obama asked former Apple CEO Steve Jobs about the topic in 2011.
Turns out, it's unlikely for a variety of reasons:
- Logistical challenges because many of Apple's parts makers are in Asia.
- A lack of manufacturing skills in the US.
- Significantly lower overall costs in China. Some estimates find that American assembly could add over $50 to the cost of making an iPhone, which would make the device significantly less competitive in the global market.
Still, there are ways Trump could incentivize Apple to build phones in the US. He's called for a 45% tariff on Chinese imports, which would reshape the American economy in unprecedented ways.
Encryption and backdoors
"Apple ought to give the security for that phone, OK?" Trump said at a rally in February. "What I think you ought to do is boycott Apple until such time as they give that security number. How do you like that? I just thought of it. Boycott Apple!"
"I use both iPhone & Samsung. If Apple doesn't give info to authorities on the terrorists I'll only be using Samsung until they give info," Trump tweeted earlier this year. (Trump has been paid to speak at Samsung corporate events.)
Although the issue over the San Bernardino iPhone has been resolved, and Apple was not forced to create a "backdoor" to crack passcodes on the iPhone, encryption remains a hot-button topic and the issue could come up again when law enforcement finds an iPhone it cannot read the data on.
It's also worth noting that James Comey, the director of the FBI, who was the person who led the bureau's battle against Apple, was also the same person who made a surprise announcement 11 days before the election that new possible Hillary Clinton emails had surfaced.
Although Comey and the FBI are nominally non-partisan, the Obama administration believes that his actions may have helped Trump win the presidency, and Comey is likely to continue serving his 10-year term under a Trump administration.
It wouldn't be surprising if Trump gives Comey permission and encouragement to bring the encryption fight back to Apple and the FBI could once again seek a way to break through the iPhone's security.