This week, Donald Trump claimed that he would impose a 35% tax on businesses producing their goods overseas but almost in the same breath, claimed he would support free trade. Following this, he stated: “We’re going to get Apple to build their damn computers in this country instead of other countries.” And on the face of it, this sounds like a perfect all-American Apple pie. It would create jobs in the North American economy, thus ensuring that the factories that build the devices offer good working conditions for employees. It would require investment into the North American economy on the part of Apple to build or refurbish existing factories. But dig a little deeper and this would assume that the President of the United States of America has the power to enforce companies to stop outsourcing and fundamentally change how the economy works.
Ultimately, the reason why businesses outsource their manufacturing into overseas economies is because of profit margins. Labor and employment costs are cheaper in other markets and in the case of Apple, there’s a 30% profit margin to maintain on each device sold not to mention hungry stockholders to reward with dividends. Apple are far from being alone in this regard. The United States of America is also far from alone in this respect, as Western businesses have been outsourcing manufacturing to other parts of the world for decades. Presumably, Donald Trump targeted Apple as they are seen as one of the more successful American companies, but there are plenty of American technology companies that outsource their manufacturing and design elements into overseas markets. If sweeping changes were made to the North American economy in order to penalize those businesses outsourcing products, this would make the country less attractive for businesses. We may see businesses relocate to other parts of the world.
We have seen an example of a Government working towards encouraging inwards investment in the shape of India, and in particular the Make In India campaign. This is designed to reward those businesses building devices in India to sell to the Indian market, rather than importing them. It’s the reason why many smartphone manufacturers have been setting up factories and distribution networks in India. The Indian economy is certainly different to North America, but perhaps a moderated Trump approach (could there be such a thing?) might work as a means of encouraging Apple to build its devices on American soil, using American workers? It would have to be a carefully crafted set of policies and legislation and might take years to put into place.