Lenovo thought it could surf geopolitics, until Trump's sudden tariff changes

Chinese hardware giant Lenovo thought it had prepared for a trade war, but its plan proved insufficient once the US started to rapidly change its tax policies in imported goods. "We are not worried about the tariff," CEO Yuanqing Yang told investors on Thursday during the company's Q4 FY24/25 earnings call. "We are worried …

[Doctor Syntax]

Just bill for the price and the tariff separately, showing why the tariff was what it was on that particular day. Yes, it'll be chaotic but point out they're Trump tariffs, not Lenovo's and he says they're beautiful. All customer complaints to him.

[FrogsAndChips]

Didn't Amazon consider that, until Bezos received a nice phone call from the Orange In Chief?

[Doctor Syntax]

That wouldn't have worked. Tariff is applied when it's imported, not when it's ordered. The best that can be done is say "Here's the sales price, you'll have to pay a tariff surcharge when you get it but we can't tell you what it will be because it could change between ordering and delivery; it's not under our control."

I can't see why Trump objects. He says tariffs are beautiful so why should they be hidden. He's not lying about them, is he?

[DS999]

It would have worked fine for Amazon

Most of their stuff sourced from China has already been imported and is in a warehouse in the US. That's the only way they can do 1-2 day shipping, after all. Their logistics system no doubt knows the exact amount to the penny of tariffs that have been paid on every imported item in their warehouses so they could have easily put that information in front of everyone. Amazon was just afraid of a MAGA boycott, though I'm sure not where the boycotters would be able to go. The only brick and mortar places to buy in rural MAGAland is Walmart and Dollar General, which also import most of their stuff from China.

Sure there is stuff from third party sellers on Amazon that doesn't leave China until you order it, but I suspect there's a lot less of it now that the "e-packet" shipment loophole has been closed. For stuff to ship normally out of China and go through customs means instead of being able to give you a date within 4-5 weeks (that's what I'd usually see when I ordered stuff that came in an e-packet) it could be a lot longer, and they'd have to build a lot of slop into their price in case the 145% tariff came back (or be prepared to cancel a lot of orders and deal with the fallout)

[Anonymous Coward]

Re: It would have worked fine for Amazon

Amazon just doesn't want you to know that a 145% tariff, only added 20% to the sell price (or 2% if it was an iphone).

They were never going to reveal margins that way.

[doublelayer]

Re: It would have worked fine for Amazon

It was Amazon's wholesale site, so the prices they're showing are much closer to the price on import, and may be identical to the price on import if the buyers are buying enough to be directly importing them.

Also, for an iPhone's 145% tariff to add only 2% to the purchase price, Apple would need to have had a 60% margin on their phones, and, crucially, be willing to still sell them at a new margin of zero. And when I say margin, I don't mean profit margin when you factor in things like software development, R&D costs, or all the money they spend on the chips they make for the phones, just the cost of manufacturing each phone, so at this 2% higher price, they'd be making a substantial loss on each unit. Incidentally, 145% is so many percents that, even if we used the 20% increase in purchase price, the reality wouldn't change much; they'd have to be collecting massive profits on each phone and they'd have to stop doing it immediately. Do you have evidence that they would be willing to do this or even that they have a ludicrously large margin in the first place; I know it's extreme, but it's not that high?

[DS999]

Re: It would have worked fine for Amazon

Apple has only raised prices twice, on a single model each time, since they introduced their "modern" lineup that includes the Pro in 2019. In 2019 the base iPhone 11 was $699, that went up to $799 in 2020 with the iPhone 12 and has remained there since. In 2023 they raised the price of the Pro Max model from $1099 to $1199. The $999 price of the Pro has been unchanged since it was introduced in 2019.

Every year there's rumors and speculation Apple will increase prices but they haven't done it aside from the two times I list above , even though many other companies used the post-covid inflation surge as an excuse - yes many price increases were legit because their costs increased but there were also a lot of companies who raised prices just because it is less noticeable when everyone else is doing it, some CEOs openly admitted it during their earnings calls.

While Apple will clearly have some tariffs to deal with (though the 25% Apple specific tariff Trump announced yesterday is clearly illegal on its face and will be slapped down by the courts fairly quickly) so they'd have the perfect excuse to raise their prices. Everyone will be raising prices because of the tariffs over the coming months, and with Apple in the news regarding tariffs a lot it'll be obvious to everyone why their prices are going up without them having to say it.

COULD Apple hold prices steady and just accept a lower margin. Sure. But why should they? Especially when Trump is specifically attacking them I think that makes them MORE likely to raise prices, as a way of calling attention to his insanely stupid tariff war. If they hold prices steady that will give the drooling MAGA idiots who believe Trump's lies that "other countries pay the tariffs" ammunition to say "see, Apple is being hit by these tariffs but they didn't increase their prices, that's proof that China is paying the tariffs!"

[doublelayer]

Re: It would have worked fine for Amazon

I'm not sure how their historical prices are relevant. I was saying that, even though a 145% tariff does not mean a 145% increase in price to the eventual buyer, there's no way it would be a 2% rise unless a sale of an iPhone was nearly all profit. Apple could not absorb that tariff the way the original poster suggested they would. The original post's calculations, if they did any, were faulty.

Apple didn't have to raise their prices in the past because they didn't get hit with tariffs anything like this in the past. Thus, your description of their history of not having price increases says nothing about what they'd do in response to an actual 145% tariff if it happened to them. I doubt they know either, as it's a ludicrous level and they have many ways to avoid it, such as moving manufacturing to India (they already done plenty of that for that reason), or convincing the leaders that the result would be unpleasant enough that they should be exempted (they've done it before and I expect they'll do it again). It's also difficult to compare their price changes, as each new model comes with new features. For example, when they increased the price for the iPhone 12, was that them increasing the price because they could or because something new in the iPhone 12 was worth $100 more? When they canceled the $429 iPhone SE earlier this year and replaced it with their new cheapest model, the $600 iPhone 16E, was that adding $180 to their cheapest model, or was their new one that much better? I note you didn't include that in your list of increases. Whether things they did count as increases is, as I said, not really important to me or their likely response to large tariffs.

[DS999]

Re: It would have worked fine for Amazon

I agree price changes can be about more than just "raising price" since features like additional cameras or better displays might be part of the reason - and there's also usually year to year deflation in other components like NAND/DRAM if the sizes remain the same.

My point was that since they've had few increases in recent years they probably have some room to do so if necessary from the tariffs. The 145% tariff wouldn't have been a huge issue since they make enough iPhones in India to supply well over half the US market - though even paying that on a third of iPhones sold in the US would be a big hit even if Apple simply passed along the tariffs in increased cost to keep profit in dollars constant even though your margin as a percentage would take a big hit.

You're right I forgot all about the SE. The cost of it went up since it went from the old LCD display to OLED and it is physically larger, that's probably part of the reason for the price hike but I think part of it will become apparent only next year. Apple has in the past kept two years worth of the base model around at a $100 & $200 discount, when the 16e was added at $599 they dropped the $599 iPhone 14 off their price list as it became redundant. I expect next year when the 17e comes out they'll drop the 16e to $499 and then have phones at 499/599/699/799 (at least I think that was their plan, ignoring potential tariff impact on those price points) It's possible they'll keep the 16e even after the 18e arrives at $399 since they maintained that price point for years until the SE went up to $429 in its last version.

[John Brown (no body)]

Re: It would have worked fine for Amazon

"Also, for an iPhone's 145% tariff to add only 2% to the purchase price, Apple would need to have had a 60% margin on their phones,"

Also worth noting that it depends on who's importing it too. The tariff applies to the "value" of the goods. If you as a customer order direct from a China based retailer, the tariff applies to the end user price. If you are Apple US importing bulk iPhones from the manufacture in China, they pay the tariff on that much cheaper wholesale price. And there's probably shenanigans going on with the wholesale prices too, eg maybe they are only valuing it at the cost of the components and labour and only adding on the other "costs" for R&D, s/w etc after it reaches US shores since that is where that bit happens.

[Old Man Ted]

Re: It would have worked fine for Amazon

PLEASE EXPLAIN HOW ONE HAS 145 PARTS PER HUNDRED? Or is what % means? Use correct thermology please'

[doublelayer]

Re: It would have worked fine for Amazon

"PLEASE EXPLAIN HOW ONE HAS 145 PARTS PER HUNDRED? Or is what % means? Use correct thermology please'"

I'm sure your mangled English has some point here, but I'm not getting it. 145% means 145 parts per hundred, yes. In fact, when calculating costs, it means 245 parts per hundred since the original hundred parts are still there. So something that costs $500 to import would now cost $500 in the same costs as before and an additional $725 in tariffs, making for a total price of $1225. Now you know how percents work.

[Michael Strorm]

Re: It would have worked fine for Amazon

> "Amazon was just afraid of a MAGA boycott, though I'm sure not where the boycotters would be able to go. The only brick and mortar places to buy in rural MAGAland is Walmart and Dollar General, which also import most of their stuff from China."

They'd have gone to those places anyway, because they're hypocrites, they just don't like their attention being drawn to that fact.

They mouth off endlessly about buying American and bringing manufacturing back. But when push comes to shove and it's time to put their money where their mouth is, they almost always buy the cheaper Chinese-built stuff anyway. (*)

They wouldn't have been upset because Amazon was importing stuff from China. They'd have been upset that they weren't being pandered to via the same excuses and backdoor tactics to cover the cost of the tariffs and avoid upsetting their customers by obscuring the fact that the only people responsible for all this were themselves and the failed businessman they'd made their god.

(Not- as other people have noted- that, even ignoring that, Amazon would actually have signed off regardless on what was only ever likely an employee proposal, purely because it would have given away their cost prices).

(*) This, among other reasons, is why it was always obvious that Trump was going to cave on the Chinese tariffs that would have cut his weak-willed followers off from the stream of cheap imports they were addicted to.

[DS999]

Re: It would have worked fine for Amazon

they almost always buy the cheaper Chinese-built stuff anyway

I think a lot of times they figure if they don't look at the tag they'll just assume it is American. When Walmart first started out its big thing was how they advertised everything was American made. As it expanded in order to squeeze out other retailers they sourced more and more stuff from China, and found out their customers simply don't care about buying American. They'll talk the talk, but when it comes time to dig in their wallet they go with what's cheapest.

Even stuff that's made in the US often has parts or materials that come from China or the EU, so these punitive tariffs are hurting US manufacturing in a big way. There were hundreds of people laid off at an appliance manufacturer about 100 miles from where I live recently. They didn't explicitly blame tariffs they blamed "difficulty sourcing parts and 'trade uncertainty'". That's CEO speak for "its the tariffs, idiot!" That town is basically that factory, if they end up closing that plant it'll take the town down with it.

[Michael Strorm]

Re: It would have worked fine for Amazon

> "I think a lot of times they figure if they don't look at the tag they'll just assume it is American."

Just not caring or intentionally sticking their heads in the sand so they have an "excuse"- for themselves as much as anyone else- that they didn't know they were buying imported goods?

As I said, they're hypocrites who cave when it comes to putting their money where their mouth is, they just don't like to be reminded of that.

> "That town is basically that factory, if they end up closing that plant it'll take the town down with it."

Who did the town vote for in last year's election?

[collinsl]

Re: It would have worked fine for Amazon

Who did the town vote for in last year's election?

Bet it was the Monster Raving Loony Party

[Extreme Aged Parent]

Is he! now would a politician lie?

[Andrew Scott]

how many things that you purchase actually are imported after you pay for them? Hard to believe that the overnight deliveries you get which include imported goods are coming direct from China or other countries with the possible exceptions of Canada or Mexico.

[Roland6]

Alternatively, only have “in-stock” in the US store stuff that has already been through US customs. The catch with this approach is that the tariff costs and risk falls on the importers shoulders and not the final customer.

As anyone who has brought stuff from the US, those few businesses that do ship internationally, make it very clear import duties etc. are the customers responsibility, with the courier companies making full payment of duties a condition of contract. Ie. They won’t agree to accept your order without you agreeing you will pay duties and taxes plus their handling fee.

[Roland6]

Move production to the US…

It’s only a matter of time before the Orange one decides Lenovo should, like Apple, be building all their products in the US, if they want to avoid tariffs and whatever other hurdles he dreams up.

[navarac]

Re: Move production to the US…

Producing stuff in the US will jack the price up even more than tarriffs, due to US v Asian wages. Personally, I'd stop doing business with the US. Only thing they are good for is stabbing people in the back.

[Michael Strorm]

Re: Move production to the US…

If nothing else, you're not going to build a plant in the US for tens or hundreds of millions- or in the case of semiconductors, several billion- on the basis of an economic policy and forecast that a capricious US government can- and will- change overnight.

[collinsl]

Re: Move production to the US…

It'll also take longer to build than Trump (legally) has left in office so it works out badly for everyone involved.

[DS999]

Re: Move production to the US…

The thing it, it is on its face illegal for Trump to tariff individual companies. He's been operating under "emergency powers" with his tariff chaos, but while it remains to be seen if the courts will accept his claims about a more general trade emergency on national defense grounds there's no basis on which he could claim that Apple specifically making stuff in China or India instead of the US constitutes an emergency.

So if/when that tariff is actually put into place I expect Apple to immediately file suit, and a judge to put a stay on the tariff, and he'll end up losing the case in the end. If Apple was a major defense contractor or something maybe he could make it stick, but they make consumer products. If there was a giant iPhone assembly plant in the US it isn't like a factory making SUVs or fishing boats that could be converted to making tanks and amphibious landing vehicles in wartime.

[Anonymous Coward]

Re: Move production to the US…

“ Yang explained that Lenovo manufactures its products in many countries, using a mixture of its own facilities and contract manufacturing firms. The company moves production to the optimal location to cope with customer needs and geopolitical conditions, and calls its strategy "China Plus".

How about Boca Ratan, FL or Raleigh, NC.

https://www.bocahistory.org/ibm-boca-raton

https://amp.newsobserver.com/news/business/article19885065.html

[Schultz]

software [for] AI PCs "a bit later than expected."

The whole AI PC concept screams "solution looking for a problem".

[fromxyzzy]

Re: software [for] AI PCs "a bit later than expected."

With any luck these "Large Action Models" will solve us out of our 'Worthless Management" problems.

[Winkypop]

Trump is highly predictable

You will ALWAYS get chaos.

[Mitoo Bobsworth]

Re: Trump is highly predictable

He is awfully consistent in his consistent awfulness.