Mac Greer: Let's move on to a Wall Street Journal interview where President Trump suggested
that the United States could slap 10% tariffs on iPhones and laptops imported from China. Ron, 10% tariff.
That sounds like a lot. What would that mean for Apple and Apple's business?
Ron Gross: First off, I don't think it will actually happen. I think it's a negotiating tactic.
A lot of bluster.
This is not a political show, so I'm going to let everyone decide for themselves what
they think about that bluster. But I do think it's a negotiating tactic.
It's ahead of the G20 meeting where there'll be further discussions with China about the
tariffs and about our trade war, for lack of a better term.
I don't think it's actually going to happen.
But if it did, certainly a company the size of Apple could weather that storm, and they
could do it by passing along price increases to consumers.
Although, I have a feeling they would not do that. They probably would eat it.
10% might translate, I've read some research, to about a $1 billion decrease in operating profit.
It wouldn't be permanent. It would be over a few quarters until things got worked out.
$1 billion in total.
If it was a 25% tariff, then of course, you're getting maybe triple that, $3 billion or so
in lost operating profit.
Again, a company the size of Apple could easily weather that storm.
It would certainly be a loss in their earnings per share, which impacts valuation.
But again, these are all short-term concerns.
If you believe in Apple as a company you want to own for the next 10-20 years,
you probably can just ignore it. Cross: Yeah, I agree with Ron.
A lot of bluster right now coming from the White House, especially ahead of the G20 meeting
this Friday and after the news with General Motors closing the plants, and the frustrations
that President Trump has with them, talking about them bringing jobs back and not selling
and manufacturing cars in China.
I think this is piggybacking on top of that, trying to show a little muscle ahead of meeting
with the G20 countries on Friday. Gross: You're hitting Apple a little bit while it's down.
The stock has come under a decent amount of pressure, as most of the FAANG stocks have.
Apple in particular is down 23% from late August, early September.
Now this kind of talk has people jumping on the bandwagon and selling Apple off even more.
Those are short-term investors, people who are more concerned about the stock going down
5-10% in the near term rather than wondering where Apple's going to be five years from now.
Again, for Foolish investors, for long-term investors, I would be more concerned about
whether Apple continues to be an innovative company, whether its ecosystem is going to
move forward, continue to generate profits.
Worry less about what's going to happen over the next two, three quarters.
Andy Cross: It's interesting to think about the pricing power Apple has.
They've been able to raise the average selling price of the iPhone dramatically over the
last five years. Now, some of the units are over $1,000.
Whether they will decide, if this happens, if they keep it and try to figure out ways
to offset that, or if they would actually try to pass that on to consumers.
And, would consumers be willing to pay a little bit higher?
We do know that iPhone sales have stagnated a little bit, and they've been able to make
their revenue growth up on the pricing side, not necessarily unit side.
Greer: I think I'm part of the problem. I have an iPhone 6s. I have no desire to get a new phone.
What I will do is, I'm going to get the battery replaced.
I've already had it replaced once, and now it's awful again.
But I don't need a new phone.
Each new iPhone, I know it's better and it takes better photos and all that, but the
difference is so incremental at this point.
Aren't there a lot of people like me who are like, "I'm good with my old phone.
I'm just going to change the battery."
Gross: I think there are a lot of people like you that have maybe the 8 or 8s.
With a 6s, you're a little bit… They're going to stop supporting that at some point.
Cross: I have a 7, and I thought I was a little bit behind.
But then, of course, I should always compare myself to Mac.
Greer: True story, I was the last guy at The Motley Fool with a BlackBerry.
One of our techies was like, "Can we quit supporting you?
Can you put that away?" Cross: Do you have your Palm Pilot, too?
Greer: I do not.
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