5 Ways The Trump Administration Could Shake Up Apple

It's Complicated

Apple has had a testy relationship with President-elect Donald Trump so far. At one point, for instance, Trump asked his supporters to boycott Apple over the company's iPhone encryption stance.

But as Trump is set to take office, Apple, Cupertino, Calif., also may stand to gain from some of his administration's fiscal policies. And Apple CEO Tim Cook, who hosted a fundraiser for Hillary Clinton during the campaign, has signaled he plans to have a dialogue with the administration. After attending the so-called tech summit with Trump in December, Cook reportedly told employees, "Personally, I’ve never found being on the sideline a successful place to be."

In the following slides, we've got details on the five issues where Apple could be most affected by the incoming Trump administration.

Encryption

During the presidential campaign, Trump sought to pressure Apple to change its stance on iPhone encryption in the wake of the San Bernardino shooting. Apple had refused to help the FBI unlock the iPhone owned by one of the shooters -- leading to a call from Trump to boycott Apple products. The Trump administration could butt heads with Apple over encryption once again because Sen. Jeff Sessions, Trump's nominee for Attorney General, is an outspoken advocate for government backdoors in devices. Sessions had strongly supported the FBI in its case against Apple and would likely be empowered, under the All Writs Act, to prosecute companies that refuse to help law enforcement avert encryption measures.

Import Tax

Trump has said he would seek to impose an up to 45 percent import tariff on U.S. companies that manufacture products in China -- while his transition team has reportedly been mulling import tariffs of up to 10 percent. That's compared to the average Chinese import tariff of about 3 percent, according to a CNBC report. Final assembly of Apple products including the iPhone is carried out in China, which could make Apple one of the hardest-hit companies by a large new Chinese import tariff. Prices of Apple products would no doubt be in for a hike. Trump would have the ability to impose the tariffs because the president is enabled to take such actions when countries are determined to be engaged in unfair trade practices -- an accusation that Trump has levied against China.

U.S. Manufacturing Plant

Trump's stated plans to seek a Chinese import tariff come in the context of spurring U.S. companies to make more of their products in the U.S. So, depending on how the Trump administration chooses to act, it's possible Apple will explore opening a U.S. manufacturing plant in response. Already, Apple has reportedly asked iPhone manufacturer Foxconn to look into moving iPhone production to facilities in the U.S. Though that, too, would likely result in an increase in price for the iPhone. Reports suggest that Apple has done a small amount of manufacturing in the U.S. in recent years, including the manufacturing of Mac Pros in Texas and some iMacs in California, but on the whole Apple hasn't had major manufacturing in the U.S. since 2004. Trump told Axios this week that he believes Cook has "eyes open to" doing iPhone manufacturing in the U.S., adding, "I think he'd like to do something major here."

Corporate Tax Rate Cut

It's not all bad news for Apple on taxes. Trump has pledged to reduce the corporate tax rate to 15 percent of profits, from the current 35 percent of profits that large corporations must pay. Apple would stand to hold on to a lot more cash if a major corporate tax cut took effect, as the company has been ranked as the most profitable company in the Fortune 500 for the past two years. Net income for Apple's fiscal 2016, ended Sept. 24, reached $45.69 billion.

Tax Holiday

Another tax issue where Apple could be among the biggest beneficiaries is the so-called tax holiday -- a proposal by Trump to let corporations repatriate profits that are held overseas at a one-time tax rate of 10 percent, rather than the current 35 percent corporate tax rate. Apple held $216 billion in foreign subsidiaries as of Sept. 24, according to a regulatory filing, and Cook has expressed an interest in returning some of Apple's overseas holdings to the U.S. in 2017. That money could be deployed for hiring in the U.S., for acquisitions -- though Apple has never been a major player in M&A -- or, perhaps most likely, for stock buybacks and shareholder dividends.