Why iPhones Make President Trump Angry (2 min read)
Later today, Apple will be releasing the details of its new iPhone, likely to be the iPhone 11. So expect more cameras, faster chips and new colours. The global interest in the release shows how pervasive the iPhone has become across the world. It also allows us to see how an identical product is priced around the world. We don’t have the global pricing of the new phone yet, but we do have it for the iPhone XS and older models.
In theory, the price of the phone should be the same across all countries once converted back into dollars. If there are price differences, it should be due to shipping costs, but the magnitudes shouldn’t be large given the small size of the phone.
However, when we scan the prices for an iPhone XS (64GB) around the world, we find dramatic price differences. The phone costs over 70% more in Argentina, Brazil and Turkey and 60% more in India. Much of this is due to due to import duties and sales tax, which would in many cases reduce the difference by half (see table). Countries like China, UK and France are 15% to 30% more expensive.
This suggests that the currencies of those countries should weaken to make the dollar price more attractive, local prices need to be reduced or that barriers and costs (like import duties and forced local partners) exist that make the phones more expensive. The latter is perhaps one of the reasons why President Trump has focused so much on trade policy. Why are direct or indirect costs added to a top US export? No wonder he’s so angry.
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