The new set of tariffs proposed on $200 billion of Chinese imports is likely to hit several gadgets such as the Apple Watch, activity trackers from Fitbit, music speakers and other accessories built in China. These devices are categorized as data transmission machines on the list of tariffs, which is currently in a public comment period.
The list is set to take effect from this fall and if it does, the products, including those from Apple (AAPL) and Fitbit (FIT), could be hit with a 10% tariff. These tariffs could force the producers to increase prices on their gadgets to deal with the rising costs. Smaller firms could see a negative impact on sales.
Based on data from Reuters, analysts expect the Apple Watch to generate sales of more than $9 billion this year, but this number takes into account international sales that would not be impacted by the tariffs. There were reports earlier this year that President Trump had assured Apple CEO Tim Cook that iPhones built in China would not face tariffs.
As the classifications and codes on the tariffs list change, there is a chance that the Apple Watch along with products from Fitbit could find themselves exempted from the tariffs. Even if companies find their products on the list, they have options to seek respite. They can ask for the tariff code to be taken off the list, they can request an exemption or they can seek a product reclassification.
For the second quarter of 2018, Apple reported a 38% growth in its Other Products segment, which includes the Apple Watch. Tim Cook stated that Apple Watch revenue saw strong double-digit growth year-over-year during the period.
During its first quarter of 2018, Fitbit sold 2.2 million wearable devices, which represented a 26.6% decline year-over-year. The company saw a 16% year-over-year increase in its average selling price driven by the growing mix of smartwatch devices.