Apple's Tariff-Avoidance Strategies

Tech giant Apple has been in the news for its reported moves to mitigate the impact of US tariffs against Chinese goods and components on its iPhone and electronics business.  Preliminary estimates suggest that the cost of a top-end iPhone could surge by 50% or more depending on its country(ies) of origin.  

Smaller companies might not be able to emulate all the strategies available to a huge global retailer/manufacturer, but there may be some lessons worth considering.

1 - Stockpiling:  News reports indicate that Apple has flown potentially millions of iPhones to the US from India (ahead of tariff dates) in a move to stockpile inventory before tariffs hit.  Reuters reported that Apple moved 600 tons of phones in multiple shipments.  Although not all goods can be stockpiled efficiently, and there are additional up-front and storage costs associated with stockpiling, this can be one means of shifting the risk of price increases due to tariffs, whether it is through stockpiling finished goods for sale or stockpiling components/raw materials that are likely to increase in cost as tariffs take effect or escalate.  

2 - Finding New Offshoring Sites: The phones moved to the US from India were reportedly made in India after Apple moved significant production there to decrease its reliance on China.  Although India will be subject to US tariffs, they are set to be much lower than the tariffs on China.  Furthermore, the tariffs on India are not yet in effect, having been “paused” for 90 days.  

3 - Expanding Operations at Existing Sites and with Existing Suppliers:  In addition to shifting more production to India from China, Apple reportedly ramped up its existing operations in India.  For example, an existing factory is reported to be operating seven days a week to meet increased output needs, and two of Apple's suppliers are said to be building new factories in India.  This likely carries additional production costs for Apple, but those can be offset (potentially) by slowing production in areas where tariffs are expected to have the largest impact. All of these moves require negotiation with suppliers and a change to any existing contracts.    

Not all companies will have the resources to alter production or shipping on an expedited timetable.  Not all goods can be stockpiled, or shipped quickly.  Not all manufacturing can be shifted to countries with a lower (or still-pending) tariff cost.  And not all suppliers or shippers will be receptive to renegotiation.  However, some combination of these strategies may be available even to smaller companies without the massive resources Apple can command.  Being creative, being open-minded, assessing your supply chain accurately, investigating the impact and availability of alternate suppliers/carriage, and communicating and negotiating with partners can all be tools to assist in mitigating the impact of tariffs.