Donald Trump's Latest Tariff Threats, on iPhones and the EU
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Meantime, he says iPhones made in India could face a 25% U.S. border tax, as Trump also seems to reverse course on a Japanese purchase of U.S. steel. Welcome, I'm Kyle Peterson with The Wall Street Journal. We're joined today by my colleagues, Joe Sternberg, live in London, and editorial board member, Mene Ukwebaruwa.

This was the tariff threat from Trump to Europe on Friday issued on Truth Social. Our discussions with them are going nowhere. Therefore, I am recommending a straight 50% tariff on the European Union starting on June 1st, 2025.

By Sunday, President Trump said that he had spoken with the president of the European Commission and was putting that on pause until July to provide more time for ongoing negotiations. Here is President Trump today explaining what happened. I gave the European Union a 50% tax tariff and they called up and they said, please, let's meet right now. Please, let's meet right now. And I said, OK, I'll give you

I TOLD YOU, I ACTUALLY ASKED THEM, I SAID, "WHAT'S THE DATE?" BECAUSE THEY WEREN'T WILLING TO MEET. AND AFTER I DID WHAT I DID, THEY SAID,

We'll meet anytime you want. Joe, what do you make of this? Did Trump get some sort of concession or is this agreeing to more talks and more Trump tariff bluster? I don't know, Kyle. It's almost like he's making this up as he goes along. I mean, the problem that the U.S. has run into, which is not new, I mean, this has been going on for decades, is that the European Union is very difficult to negotiate with about anything. And it's not necessarily because the Europeans set out to hurt

America or anyone else. It's just structurally, they're very disorganized. I mean, remember, we talk about the European Union as if it's one entity, but it is 27 different countries, all of whom have to be able to agree on things like tariff rates or

food safety standards for imported American chicken or beef or pharmaceutical regulation or any of the rest of it. So, you know, what happens is they find themselves in a situation where they have to negotiate with someone like Donald Trump very quickly, and it's very difficult for them. And then President Trump seems to have found that

very annoying. And so he came out with this 50% tariff threat over the weekend. And what seems to have happened is the European Commission President Ursula von der Leyen, who's really in charge of the bureaucratic apparatus in Brussels that is running point on a lot of these negotiations,

does seem to have called up and suggested that she would try a bit harder to herd those cats more aggressively. But there's no commitment yet for any kind of deal there. It's not clear when the two sides would be able to agree on a deal. It's not even clear exactly what the Trump administration is asking for in these negotiations. So I think that there's a certain amount of frustration on the U.S. side, which has been there for a couple decades.

There was this big tariff threat over the weekend that the markets reacted to very badly. And then there was an opportunity for a graceful exit that the European Union provided by promising that they would talk harder. It does raise the question, Monet, though, of...

How many times can Trump do this promise some kind of crushing tariff unless he gets what he wants? And then at the last moment, seeming to back off, that was the history of liberation day after some turmoil in the financial markets. And does he lose credibility when he does that? That seems to be the betting for now. On the other hand,

Who knows what will happen after the 90-day Liberation Day tariff pause ends if he will move forward with some of those tariffs, which countries. I wouldn't put it past him to think that he can't let it go forever. He has to actually pull the trigger at some point. Otherwise, you're just another guy yelling into the Internet. Yeah, I mean, I think that there's no doubt at all that Trump has chronologically

Cried Wolf to a certain extent already. The way that the markets reacted to the announcement of 50% tariffs on the EU, if they were taking that literally, it would have been much more severe than it actually was. Despite the fact that we saw significant losses, it was clear that there was a little bit of hesitation to take them seriously and think that these were likely to go into effect.

given that the EU taken as a single entity would be one of the biggest, if not the biggest, US trading partner. And so it's obvious that investors have kind of gotten the scheme by now and know to attach a certain amount of discount to whatever the pure economic impact of Trump's tariff announcements would be. But on the other hand, we have to know that

every time he walks back from these tariff threats, he merely delays them. Very rarely has he completely taken them off the table. And so people still think that there's the chance that

Okay, now we're extending another month for talks between the EU and the United States. And that potentially will lead to deals that reduce the tariff rate, but don't necessarily get us all the way down from the 50% that he announced. And so investors have to not only try to discount what Trump says and not take it literally, but they have to try to sense that.

when we get the final product here, how much is it going to toe a line between going back to zero, which is very unlikely, and going all the way to the maximum number that Trump announced? Hang tight. We'll be right back in a moment. Isn't home where we all want to be? Reba here for Realtor.com, the pro's number one most trusted app. Finding a home is like dating. You're searching for the one. With over 500,000 new listings every month, you can find the one today.

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Welcome back. Similar question on this threat of tariffs on iPhones. Apple has suggested that it is going to move manufacturing of iPhones sold in the United States out of China and to India. And Joe, on a previous podcast, we discussed

The uncertainty at that point about whether the Trump administration would take that as a win. It is concerned about Beijing's behavior for good reason. There have been many companies that have been trying to shift manufacturing out of China to friendlier to the U.S. locales, including Vietnam, including India. So one way that the Trump administration could have gone is to say,

We have secured a victory here. India is an ally. It's a democracy. And this is a country that we can do business with where we don't think that it's worth the U.S. companies, the risks to the United States, the risks to their intellectual property to do this kind of business in China.

But President Trump has now made clear that he wants to go a different direction. This also on Friday was his Truth Social post. I've long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India or any place else. If that is not the case, a tariff of at least 25% must be paid by Apple to the U.S.,

Let's listen to White House economic advisor Kevin Hassett discussing this on CNBC yesterday.

Joe, what do you make of this? I mean, it seems to me to lay bare some of the contradictions

in the trade war with everybody at the same time approach that President Trump is undertaking here. I could understand a White House that said China is an economic adversary. It's a geopolitical adversary. We think U.S. companies should be doing business in places that are more friendly, but that

to me, would be counseling toward the first approach, then, of saying that this move to India is a win. Well, they seem to be... I mean, we say they. Really, it's President Trump seems to be...

pursuing three objectives at the same time, which are more or less mutually exclusive. So, I mean, on the one hand, they do seem to be concerned about the security implications of the volume of trade with China that the U.S. has been engaged with over the past couple decades.

I think that there are reasons to be mindful about that. I think that we discovered during the pandemic some of the supply chain vulnerabilities that can develop. Certainly, Beijing is a strategic rival in the Asia-Pacific. So, okay, all well and good if you want to do something about that, although rapid decoupling probably is not the right thing to do.

But against that, you have the second objective where they also seem to be hell-bent on bringing manufacturing for everything under the sun back to the U.S. And that is why I think it's so difficult for President Trump to just claim victory when you have a company like Apple saying, okay, we are not going to do manufacturing of this economically significant product in a strategic rival anymore. We are going to do it within a friendly country like India.

You know, you can't claim that as a victory if you're also pursuing this objective of producing everything domestically. But, you know, the third objective is to not force American consumers to pay more for things. And I think that that is really where they're starting to run into a lot of trouble. And it seems that Kevin Hassett, who I think is a very smart economist,

can probably tell at this point that, you know, maybe things are starting to go a little awry because, you know, you're starting to see these questions about whether consumers might face higher prices as a result of the tariffs. I think consumers almost inevitably will. And there are going to be political consequences for that, especially because no one explained to voters that that might be a consequence of the tariff policy Trump promised on the campaign trail.

So I think that he's in this situation where he wants so many things at the same time, and they are all in conflict with each other, that he's never going to be able to claim victory, even when it is something that objectively might be a victory. What about the feasibility, Manet, of this kind of mass production of iPhones, like the scale that we're talking about in the United States? It seems to me that there are

whole host of challenges to that. One is the scale, the workforce that would be needed for that. Two is the facilities. I mean, one of the reasons that the shift to India makes sense for Apple is that it has business already. It is already doing manufacturing in India. And so it is easier to expand that production and then send the iPhones that are built there to the United States

than it is to set up shop totally new somewhere else where it is not doing that kind of manufacturing. And to give a sense of the scale, here's a headline from a week or so ago. In the Times of India, it says Apple's biggest contract manufacturer, Foxconn, readies 300 acre iPhone making campus in India with dorms for 30,000 employees.

So Foxconn is a longtime Apple contractor. It knows how to build these phones. It's been building these phones for a long time. It has experience. It has the facilities. And, Manay, I'm struggling to figure out where Apple would set up shop with 30,000 employees somewhere in the United States in the short term building iPhones. I mean, that would be a really monumental undertaking that would take

way longer, I think, than President Trump is thinking here when he's trying to incentivize shifts in business with these tariff threats. Yeah, I think one of the ironies here is that when Americans think about our relative disadvantage when it comes to manufacturing domestically is we always think of it in terms of the price of labor. And that's true that China has a very cheap labor force, very large, as well as a lot of other developing countries and are able to pay

significantly reduced wages to get these items produced. But that doesn't mean that that labor is not at the same time also highly skilled. That's something that I've been learning a lot more about as I've been looking into what is the actual process for fabricating the components that go into an iPhone. And you see that a lot of these workers

while being paid very low wages, also are very, very specialized in how to cast the materials and how to go about the different components of fabrication. It's an extremely varied process. And the idea that you'd be able to replicate the combination of those two factors in a wealthy country like the United States just doesn't pass muster at all. And the timeline, like you mentioned, even if Apple was convinced that these tariffs, 25% on any

any iPhones imported into the United States were going to last for decades and decades. At the very soonest, it would take many, many years for them to be able to invest in replicating the kind of facilities that they have in the whole network of countries where they're sourcing these items into the United States. And so it's very likely that this policy is not going to outlast the Trump administration. And so comparing the cost of what

iPhone would be to buy in the United States if they were to try to source it all domestically, which the upper estimates have been around $3,500. That might be slightly exaggerated, but still going to be an additional $1,000 or so versus just having to pay that 25% tariff rate. That's exactly the direction that Apple is going to go if they don't convince Trump to

peel them back, which they probably will be able to do by making some kind of big splashy announcement about spending $100 million on chip design or some other concession that they can give to Trump so that he's able to declare victory. The estimates that I've seen on what a US manufactured iPhone might cost, I mean, they vary, but it could be $1,000 more than the current models, Joe, or $2,000.

And part of the difficulty here is Trump keeps insisting that these tariffs and his trade protectionist policies do not have effects on consumers. And then occasionally he lets it slip that, OK, maybe your daughter is only going to have two dolls instead of 30 dolls.

calling on Walmart to eat the tariffs recently. But if you start doing the math on those kinds of numbers, I don't know the size of the US iPhone market in terms of annual sales, but I imagine it is millions and millions.

And if the cost differential is $1,000 or $2,000 more, do the math on that. And it is a pretty big number, a sizable number. And I get that when people start talking about the government budgeting and the big, beautiful bill, a few billion dollars here and there is a rounding error in the scope of the federal budget. But when you're talking about even a company the size of Apple, billions of dollars

is a huge amount of money. And is President Trump calling on Tim Cook and Apple to eat those losses more or less, not pass them on to consumers? I doubt that internet shareholders would be fans of that idea. And yet,

iPhone consumers, I think, wouldn't want those prices to go up either. And so I have trouble figuring out exactly what the approach by President Trump here is supposed to do. Yeah, I mean, the reality is that American consumers are going to end up paying one way or another for these tariffs. And I mean, so the first order issue that you have to think about here is, again, whether the U.S. can even produce these phones domestically at any cost. I mean, I think Monet did a fantastic job

of laying out a bunch of the workforce problems that you would run into. And the only thing to add to that list is that, I mean, we can't fill all of the job openings that we have for the manufacturing that we already are trying to do in the US. So you're going to have these enormous manpower problems. And so that implies

that you're either stuck paying the tariff on the phone that you've had to import from outside because there is no way that you could possibly find the people to produce it domestically, or people are going to end up consuming fewer phones. So I think that the future for consumers here is higher prices. So that means that you're either paying the money to Apple directly or

or you're quote unquote paying in the sense that you have to hang on to your existing phone longer than you would ordinarily want to because you can't afford to replace it at the higher tariffed price that you will now have to pay. And potentially alongside that, you end up paying through your 401k. You know, your mutual funds or exchange traded funds in that portfolio are probably invested in Apple in part. So Americans are on the hook

if this has negative implications for stock prices and corporate earnings. And then, you know, if you do buy that phone, you pay in the form of not being able to afford other things that your household might have wanted to buy that month because the price is higher.

So, I mean, there is a reason that relatively low prices for a lot of products are popular. That translates into a higher standard of living for a lot of people, and especially when you can't really argue anymore, if you ever could, this is coming at the expense of manufacturing employment because we have a job market that continues to be pretty strong and can't fill the manufacturing job openings that we have. Hang tight. We'll be right back in a moment.

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Welcome back. One related piece of news that dovetails with this conversation about the interconnectedness of global markets these days, the Nippon Steel, Japanese company purchase of U.S. steel, has been questioned for political reasons. In my view, it was unclear, Monet, whether the Trump administration was going to oppose that deal and try to block it. President Trump now seeming to change his approach. This is his recent statement. It will be a planned partnership between

between United States Steel and Nippon Steel, which will create at least 70,000 jobs and add $14 billion to the U.S. economy. So sounding more positive about that tie-up than he had in recent days. And again, I think this gets to the difficulties of trying to parse what exactly the motivations of these political actors are when they start talking about these kinds of global deals, because the context of this is,

is that this Japanese steel company wanted to invest in U.S. steel. It said it would abide by the bargaining agreements with U.S. steel workers, and it wanted to put money into the U.S. to invest, to retool the factories and so forth, the steel mills that U.S. steel has. That would be good, I think, for U.S. workers.

But it is pretty easy, I think, for populists to take out a flag and say, you know, U.S. Steel, we are going to stick by U.S. Steel. It has to be an American owned company. And so a positive move. I think that President Trump seems to be changing his tone about that deal somewhat here. Yeah, I think that the easiest way to read how Trump parsed this deal is that Trump will never support any deal that isn't brokered by him.

And so basically, Nippon Steel was attempting to acquire U.S. Steel during the Biden administration. And Trump criticized that arrangement for protectionist reasons, which he probably does actually hold to some degree, saying that we can't let this hallowed U.S. company be acquired by a foreign competitor who knows what that's going to do to U.S. Steel jobs and things of that kind. He probably has some sense that

he would like this country to remain American controlled. But because that was being done during the Biden administration, Trump's gut impulse, like with many other things, TikTok being the, I think, clearest example, clearest parallel, is to say, I'm going to come out and oppose this. And then once I get into office, I can then bring the parties back to the table and say, what concessions are you going to make? He got Nipon Steel to say, we're going to appoint US board members to run it. We're going to

say, we're not going to close any facilities for at least 10 years, and we're going to get government sign-off if we do that. And that way, Trump is able to go to Pennsylvania and say, look, I was able to get the company to invest in the United States. I protected American jobs. The terms that Nipon Seale is agreeing to are basically identical to the ones that they proposed under the Biden administration. So Trump didn't really extract these concessions

But as always, he wants to be at the center of the process and say, hold off, give me a chance to bring everyone to the table. And so that way I'm able to suggest that I'm the great dealmaker and I'm the one who ultimately delivered these results. So I don't think it was really about protectionism.

as much as it was about Trump's own aims and image.

We still don't know all the exact details of that. But I guess I tend to look at this similar to Monet. As far as I know, the economic terms of the deal are not all that different than what was being discussed even under President Biden. And so is this an example of Trump trying to change the framing around the deal, even if the deal itself is not changing all that much?

much. Yeah, I mean, I think there's a certain acknowledgement of economic reality here, which is that Nippon Steel was promising to do a level of investment in U.S. Steel that no other competing bid was going to be able to match, and that potentially the alternative is that those assets end up shutting down, or you lose that employment opportunity

Now, I mean, I think it's great that the deal is going ahead. And I think that sometimes you have to not be too prissy about the circumstances of some of these messy political negotiations. But I do think that we shouldn't give them too much of a pass for success.

stumbling into the right answer after they tried all of the possible wrong answers that they could have explored here. Because I think that this is a perfect example of how the U.S. really should have been rolling out the welcome mat for this kind of investment in an important industry where there is a lot of scope for foreign both

capital and management expertise, which is one of the things that I worry that we lose with all of these conditions that require an intrusive U.S. government presence or oversight of some sort or that start placing mandates on the management structure of the company. I mean, part of the point of this

is to bring in that outside expertise. And America's openness to that kind of innovation has always been a big part of our economic advantage. So I do think that we should reflect on why it is that it seems to be so difficult for us to accept that kind of investment and that kind of expertise, even from

a country like Japan, which, you know, barring South Korea, is going to be one of our closest allies in Asia. And yet even then, we become so skittish about this kind of investment. And I think we need to really pause to ask ourselves at some point the way this played out. I mean, we reached the best of the

possible ending points in the end, but are there ways that we can make this kind of situation easier for ourselves in the future? Thank you, Joe and Manet. Thank you all for listening. You can email us at pwpodcast at wsj.com.

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