Apple: What is Trump Really Mad About?

Apple, Trump, and the Cost of Global Manufacturing: Unpacking the Real Battle Over U.S. Tax Revenues

It is highly improbable that Apple (AAPL) will relocate its large-scale production operations back to the U.S. The majority of iPhone production takes place in China, primarily through Foxconn (Hon Hai Precision Industry), Apple's largest manufacturing partner. About 70-80% of iPhones are assembled in China, benefiting from the country's extensive supply chain, skilled labor force, and cost efficiencies.

Smaller segments of production are carried out in India (e.g., Chennai, through Foxconn and Wistron) and Brazil (for local markets), but China remains dominant due to its superior infrastructure and production scale.

Trump's primary concern with Apple centers on its ties to China.

I've previously discussed the ongoing economic conflict between these two global powers, so I won't revisit that here.

Apple has significantly ramped up its manufacturing in India, driven by U.S.-China geopolitical tensions, tariffs on Chinese imports, and India's expanding production capabilities. As of 2025, about 15-20% of global iPhone production takes place in India, a sharp rise from nearly zero a few years ago. Apple has been shifting its supply chain away from China for years, with India becoming a key hub due to its lower labor costs, government incentives, and increasingly skilled workforce.

However, manufacturing in India remains 5-8% costlier than in China due to infrastructure challenges, regulatory complexities, and higher import duties on components.

Still, this is far more practical than relocating large-scale production to the U.S., where high labor costs and inadequate infrastructure make it unfeasible.

When considering key factors driving cost differences such as labour, supply chain logistics, infrastructure, and government incentives, shifting iPhone production to the USA would increase costs¹ by:

• 30–50% from China, adding ~$75–$150 per unit.

• 25–45% from India, adding ~$70–$140 per unit.

The second concern is that relocating production to India would remain more cost-effective for AAPL, even with a 25% tariff, compared to bringing it back to the U.S.

So, where is the hang-up with Trump?

Yes, its close ties with China are one factor. Yes, its reliance on foreign manufacturing is another. However, there is a deeper issue that the U.S. is attempting to address, which, in my view, is increasing government cash inflows (we should all understand by now the precarious position the U.S. government finds itself in to fund their continued deficits).

Apple's effective tax rate for the most recent fiscal year was approximately 15%. This aligns with its three-year average but is slightly higher than its five-year. Apple’s effective tax rate has consistently remained below the U.S. statutory rate due to global operations².

As we can see, Apple effectively reduces its tax obligations through a combination of legal strategies, utilizing international tax regulations, and optimizing its global corporate structure. A significant amount of capital is not repatriated to the U. S.

Notably, the 2017 Tax Cuts and Jobs Act, introduced during Donald Trump's first term, included a-time repatriation tax (15.5 on cash and 8% on non-cash assets), which prompted Apple to return $252 billion. However, this has not deterred Apple from using foreign subsidiaries to defer taxes on new earnings.

THIS IS THE REAL ISSUE. GOVERNMENT RECEIPTS.

Yes, in a way, AAPL has greatly exploited the U.S. economic system, as have many others.

“The company run by Tim Cook has spent more than half a trillion USD on stock buybacks in recent years, a huge amount it could afford thanks to its perfect system of extracting the highest possible amount mainly from US consumers while paying the lowest possible amount of profit taxes back to its country. Only a fraction of those hundreds of billions of USD was needed to build factories to manufacture iPhones meant for the US domestic market directly in the US. However, companies like Apple have been allowed to expand their profit margins to the extreme for the benefit of a few at the expense of everyone else.” - (JustDario, 2025, para. 4)

To that end, the economic policies and conditions established by the U.S., particularly from the 1980s onward, resulted in such actions taking place. However, the consequences are now becoming evident. Trump, who asserts his dedication to the people of his native country, is attempting to demonstrate this. Yet, like all politicians, does he succeed? Likely not.

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● Written with the help of Grok

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• Labor Costs:

  • China: Average manufacturing wages are ~$4–$6/hour for skilled assembly workers, with Foxconn employing hundreds of thousands at low cost.

  • India: Wages are slightly lower than China’s, at ~$3–$5/hour, but inefficiencies in training and infrastructure can offset savings.

  • USA: Manufacturing wages are much higher, averaging ~$20–$30/hour for comparable roles, with additional costs for benefits, overtime, and unionized labor in some regions.

• Supply Chain and Logistics:

  • China: Hosts a highly integrated supply chain, with ~90% of iPhone components (e.g., displays, chips) produced locally, minimizing transport costs and delays.

  • India: Relies on imported components (many from China), incurring ~5–8% higher logistics costs due to duties and transport. India’s supply chain is less mature but improving.

  • USA: Lacks a robust electronics supply chain. Most components would need to be imported, facing tariffs (e.g., 20% on Chinese imports) and high shipping costs. Building a U.S. supply chain would require billions in investment and years to scale.

• Infrastructure and Scale:

  • China: Offers unparalleled manufacturing scale (e.g., Zhengzhou’s “iPhone City” produces millions of units annually) and reliable power, transport, and facilities.

  • India: Infrastructure is less developed, with issues like power outages and traffic increasing costs by ~5–10% compared to China.

  • USA: High infrastructure costs (e.g., land, utilities) and limited large-scale electronics manufacturing facilities would require significant upfront investment.

• Government Incentives:

  • China: Provides subsidies, tax breaks, and low-cost land to manufacturers like Foxconn.

  • India: Offers incentives via the Production Linked Incentive (PLI) scheme, reducing effective costs by ~5–7% for Apple.

  • USA: Limited federal incentives for electronics manufacturing, though some states offer tax breaks. High regulatory compliance costs (e.g., environmental, labor laws) add to expenses.

• Profit Shifting to Low-Tax Jurisdictions:

  • Apple routes significant profits through subsidiaries in low-tax countries, particularly Ireland, where corporate tax rates are as low as 12.5% (compared to the U.S. statutory rate of 21% post-2017). For example, until 2015, Apple used Irish subsidiaries like Apple Sales International to book profits from European sales, paying effective tax rates as low as 0.005% in 2014 due to Ireland’s tax loopholes.

  • The “Double Irish With a Dutch Sandwich” strategy was a key tactic: Apple funneled profits through Irish subsidiaries, then to the Netherlands, and finally to tax havens like Bermuda or the Caribbean, minimizing taxes on international earnings.

• Deferral of U.S. Taxes:

  • Apple has historically deferred U.S. taxes on foreign profits by keeping earnings offshore, leveraging a pre-2017 U.S. tax code provision that allowed companies to avoid taxes on foreign income until repatriated. By 2017, Apple had accumulated over $250 billion in offshore cash, largely untaxed by the U.S.

• Tax Credits and Deductions:

  • Apple claims U.S. federal R&D tax credits for its substantial investments in research and development, reducing its domestic tax liability.

  • Share-based compensation (stock awards to employees) generates tax deductions, further lowering the effective tax rate. For instance, in 2023, these benefits contributed to Apple’s effective tax rate of 14.7%, below the U.S. statutory rate of 21%.

• Strategic Intellectual Property (IP) Allocation:

  • Apple places its valuable IP (e.g., patents, trademarks) in low-tax jurisdictions like Ireland. Subsidiaries in these regions license the IP to other Apple entities, generating royalty payments that shift profits to low-tax areas. This allows Apple to attribute significant income to countries with minimal tax rates.

• Optimizing Global Supply Chain:

  • Apple’s supply chain decisions, such as manufacturing in countries like India and China, are influenced by tax incentives. For example, India offers production-linked incentives (PLI) to boost manufacturing, which indirectly reduces Apple’s tax burden through subsidies and lower operational costs.

• Advocacy for Tax Reform:

  • Apple has publicly supported global tax reforms, such as the OECD’s 15% minimum corporate tax agreement (implemented in some countries by 2025), which aligns with its existing effective tax rate while reducing scrutiny. This positions Apple to maintain low taxes without aggressive loopholes.

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