Trump's flawed tariff policy triggers backlash from U.S. companies: Apple moves iPhone production to India, reconstruction costs in Los Angeles skyrocket
In April 2025, former U.S. President Trump announced the implementation of "reciprocal tariffs" on multiple countries, with rates ranging from 10% to 54%. The American Enterprise Institute pointed out that the White House used an incorrect formula, causing the rates to be overestimated by a factor of four, leading to a backlash from businesses. Apple plans to produce 25 million iPhones in India to reduce costs; toy company BasicFun is facing pressure to raise prices. Reconstruction efforts after the Los Angeles wildfires have become more costly due to increased lumber tariffs.
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04/08 14:43
Trump's flawed tariff policy triggers backlash from U.S. companies: Apple moves iPhone production to India, reconstruction costs in Los Angeles skyrocket
In April 2025, former U.S. President Trump announced the implementation of "reciprocal tariffs" on multiple countries, with rates ranging from 10% to 54%. The American Enterprise Institute pointed out that the White House used an incorrect formula, causing the rates to be overestimated by a factor of four, leading to a backlash from businesses. Apple plans to produce 25 million iPhones in India to reduce costs; toy company BasicFun is facing pressure to raise prices. Reconstruction efforts after the Los Angeles wildfires have become more costly due to increased lumber tariffs.
Trump's 'Reciprocal Tariff' Formula Error: Tariff Rate Overestimated by Four Times
The American Enterprise Institute (AEI) recently released a report pointing out a critical error in the "reciprocal tariff" calculation formula used by the Trump administration. The formula was supposed to be based on the elasticity of import prices, but the White House mistakenly used the elasticity of retail prices, resulting in the tariff rate being overestimated by about four times. AEI economists Stan Veuger and Kevin Corinth noted that the elasticity value used by the White House was 0.25, whereas it should have been 0.945. This erroneous data resulted in Cambodia's tariff rate being overestimated from the actual 13% to 49%, and Vietnam's from 12.2% to 46%.
The report further pointed out that the formula used by the White House "lacks a foundation in economic theory and trade law," relying solely on dividing the U.S. trade deficit with a country by that country's total exports to the U.S., then dividing by two, as the basis for imposing tariffs. AEI scholars criticized this move as "entirely amateur" and questioned whether the White House deliberately manipulated data to achieve high tariff political goals.
The White House responded by stating that using retail prices is reasonable because consumers make purchasing decisions based on retail prices. However, research by Harvard Business School professor Alberto Cavallo shows that the elasticity of import prices to tariffs is closer to 1, supporting AEI's view.
U.S. Businesses Push Back, Apple Shifts iPhone Production to India
Facing high tariffs, U.S. companies are seeking strategies to cope. Apple, one of the tech giants most reliant on China's global supply chain, is accelerating the shift of some iPhone production to India. According to Bank of America analyst Wamsi Mohan, Apple is expected to produce about 25 million iPhones in India this year, with around 10 million for the local market and the rest available for the U.S., meeting about 50% of U.S. market demand.
Apple's move aims to alleviate the cost pressures from the 54% tariff on Chinese goods. For example, importing the iPhone 16 Pro from China would increase hardware costs by about $300, while importing from India could halve the cost increase. Apple also urgently airlifted five planes full of iPhones from India and China to the U.S. by the end of March to clear customs before the new tariffs took effect.
Despite this, Apple does not intend to completely abandon the Chinese supply chain and views the expansion in India as a short-term response. Currently, Apple has established its fourth iPhone manufacturing plant in India, operated by Tata Electronics, and is gradually expanding to produce the latest models.
BasicFun Toy Company Faces Tariff Pressure, Prices Could Rise Across the Board
Jay Foreman, CEO of U.S. toy manufacturer BasicFun, stated that Trump's tariff policy has severely impacted the company. With 90% of its products manufactured in China, facing potential tariffs of 54% to 104%, Foreman has completely halted shipments from Asia and warned, "This will destroy our business."
Taking the classic Care Bears as an example, originally priced at $15, a 20% tariff would increase the price to $19.99. Foreman pointed out that it's not just teddy bears that will see price hikes, but almost all consumer goods, including toys, clothing, accessories, and school supplies. He emphasized, "These small amounts of $1, $2, and $5 add up to a significant burden for consumers."
Foreman also admitted that while he hopes to move production back to the U.S., the country currently lacks sufficient manufacturing facilities and labor, making it difficult to achieve in the short term.
Los Angeles Wildfire Rebuilding Costs Soar Due to Tariffs
In addition to the business community, ordinary citizens are also feeling the pressure from tariffs. The Los Angeles area suffered severe wildfires earlier this year, and rebuilding efforts are in full swing. However, the cost of building materials has skyrocketed due to tariffs, especially lumber.
Currently, Canadian lumber tariffs have reached 14.5%, and if Trump imposes an additional 25%, the total tariff rate will exceed 50%. This means that the construction cost of each home will increase by about $10,000. Local residents said, "Everyone will be shocked by the high prices during rebuilding."
