To Navigate Trump’s Tariffs, Apple and Nintendo Take Different Paths

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[00:00:30] Hey TNB listeners, before we get started, a heads up. We're going to be asking you a question at the top of each show for the next few weeks. Our goal here at Tech News Briefing is to keep you updated with the latest headlines and trends on all things tech. Now we want to know more about you, what you like about the show, and what more you'd like to be hearing from us. Our question this week is, what would you like to hear from the tech headlines?

[00:00:52] If you're listening on Spotify, look for our poll under the episode description, or you can send us an email to tnb at wsj.com. Now on to the show. Welcome to Tech News Briefing. It's Tuesday, April 15th. I'm Victoria Craig for The Wall Street Journal. Today, we've got a show for you about the different ways global tech companies are playing President Trump's game of tariffs, exemptions, and pauses.

[00:01:20] Apple's CEO is taking a long-term strategy while Nintendo has already switched gears on how to get its gaming consoles into the U.S. But we start with the long game. For the past two weeks, tariffs have threatened to wreak havoc on the world's most valuable company. Much of the manufacturing for Apple's iPhones happens in China, which means the tech titan faces a hefty bill when it imports finished products to sell in America.

[00:01:50] We've talked at length on the show about how Apple faces some pretty high hurdles to bringing that manufacturing process home, which is why investors were cheered by a decision that came with no fanfare over the weekend. The Trump administration exempted some tech products from tariffs, including smartphones. But Trump quickly caveated that move, saying he put in place a separate tax soon.

[00:02:14] WSJ columnist Tim Higgins writes that despite the on-again, off-again chaos, Apple CEO Tim Cook has developed a steady and patient hand. So, Tim, we didn't hear a word from Tim Cook publicly over the last two weeks, but you argue in your piece that he was likely not staying quiet behind the scenes.

[00:02:33] Well, absolutely not. We've reported that Apple was rushing iPhones made in India to the U.S. to help offset some of the cost of potentially huge tariffs being put on Chinese-made iPhones. And also what at the time was expected to be some increased tariffs on Indian-made iPhones. But clearly trying to take some short-term steps to figure it out.

[00:02:59] We also know that Tim Cook has developed a close relationship with the Trump administration, and you can just imagine that he wasn't going to be shy. Are there two ways to think about how Tim Cook is keeping Trump on side in a way? One, it's that he, after Trump won re-election in November, he donated to his inauguration fund. But also, can he use what Apple's doing well at home to try to convince the president to perhaps be more lenient on how it treats Apple when it comes to these tariffs?

[00:03:28] Apple and Tim Cook are always very quick to talk about how critical they are to the U.S. economy, how many jobs they create. They've talked in recent months about investments that they're planning to make in the U.S. These are big numbers they are throwing around. And Tim Cook has talked about in the past that he doesn't think Apple could be what it is if it wasn't a U.S. company.

[00:03:54] The way that Tim Cook just talks to lawmakers and presumably the president is in this kind of tends to be a little bit of a humble, aw shucks, Alabama accent, Americana. Apple's out there creating jobs, good for the country. That is his go-to kind of stump speech, if you will. And that's the kind of message that in a lot of ways Trump wants to hear.

[00:04:24] In a world with very short attention spans, it seems like Tim Cook is always playing the long game with this relationship, especially with President Trump. We've talked a lot about how these tariffs could affect and are likely to affect Apple. What kinds of things was Tim Cook likely pushing for behind the scenes? There were some in the White House who were out very publicly talking about how the tariffs were going to move assembly of the iPhone to the U.S.

[00:04:52] And those who thought that was going to happen just haven't been paying attention to Tim Cook or Apple over the past 13 years as he has been CEO.

[00:05:03] And he has really developed an incredible industrial machine that is heavily based in China, but also has suppliers around the world, including the U.S., set up to create these iPhones in an incredibly important part of the global economy and so many different ways. And moving that is not something you do overnight. It is not something you do in a quarter. It is not something that you do in a single year.

[00:05:31] Apple has been working in the past few years to diversify its supply chain. It has been ramping up production in India. It is doing production of its other devices in Vietnam. But it takes time. Cook has talked about the workforce in China is being skilled. He would say it's not about low-cost labor, but you can't argue with the fact that the labor in China is cheaper than the U.S. But there are cheaper places in the world as well.

[00:06:00] That's his point. There's also an issue of getting the assembly and the production to quality standards that Apple holds so near and dear to itself. This is something that takes a lot of time to sharpen. And so we kind of see two kind of opposing views on the world going on right now.

[00:06:21] Tim Cook's kind of vision of the long arc of time, making plans for the years ahead versus Trump administration wanting things to happen very quickly. And it puts the two worlds on a collision course. That was Wall Street Journal columnist Tim Higgins. Coming up, we'll tell you how Nintendo is playing the short game on tariffs and what that means if you want to get your hands on the company's latest console. That story after the break.

[00:07:16] For a long time, Nintendo has had plans in place that would let it stay nimble in the face of a trade war. So when President Trump raised U.S. tariffs on China to as high as 145% for some goods, the company was able to pivot almost instantly. WSJ columnist Christopher Mims says that sent a wave of relief through customers of all ages, including some that are very close to home.

[00:07:44] So Christopher, just put into perspective for us how highly anticipated the Switch 2's launch is, both in and outside your own household. Within my own household, my two sons, a teenager and a nearly teenager, have been saving all of their pennies in order to buy one of these. And turns out that's not atypical. There are 190 million gamers in the United States of America.

[00:08:11] Nintendo has sold more than 50 million of the original Switch consoles in the eight years that it has been out. And the level of anticipation for the Switch 2 is through the roof. This is singly the best selling video game console in the U.S., certainly.

[00:08:28] And so the fact that kids might not be able to get their hands on it here in the U.S. because of tariffs has made tariffs a subjective conversation among my children and apparently in many other households. I was really floored by some of the numbers in your piece about just how fast Nintendo is able to shift where it's importing some of its consoles from into the U.S.

[00:08:52] Nintendo, like many other electronics manufacturers, especially Apple, really anybody with much scale, ever since Trump's first term and especially COVID has been preparing for today. And what they have done is what's called a China plus one strategy where they are trying to source their goods, their final manufactured electronics still from China, but then also from some other place. For a lot of these companies, that's Southeast Asia.

[00:09:22] So Nintendo in particular, it's Vietnam and Cambodia. Other companies have moved manufacturing to places like Thailand. For customers, particularly in the U.S., the big question is going to be around pricing because people were already really wary of the $450 price tag that the Switch 2 was going to carry. Could that dollar amount go even higher because of the tariffs?

[00:09:43] Initially, it seemed like Nintendo was either going to have to not sell the Switch in the U.S., which really is an impossibility for them, or possibly charge a great deal more under the original tariff scheme where they were looking at, we have to toggle back on our minds because it changed so much. But originally it was like 50% tariffs from China or 50% tariffs approximately from Vietnam. And those are the two places where they manufacture almost all of the Switch 2s.

[00:10:11] It now appears with the tariff pause that Nintendo could potentially sell the Switch 2 at its original $450 price because the tariffs are only, and I'm putting that in air quotes, 10% from Vietnam. Part of what's going on here is that Nintendo ships these consoles the quarter before they're going to be distributed to retailers.

[00:10:33] So the company looks like it has already imported close to 2 million Switch 2 consoles into the U.S. I've been told that many of them are sitting at a warehouse in Seattle. And so Nintendo could just sell those as is without tacking on a surcharge for tariffs, but then they risk alienating people two, three months from now if they had to jack up the price because of tariffs. What has Nintendo said, Christopher?

[00:11:00] So Nintendo declined to comment on the specifics of their pricing plans and the details of their manufacturing and shipping. They did say that the pre-order date in the U.S. for the Switch 2 continues to be delayed. So I'll ask you the same question I've been asking almost everyone else when it comes to tariffs and tech. Can an American-made Switch be possible for Nintendo? It's such a great question.

[00:11:27] Everything depends on your time horizon, right? Ten years from now, could we have an entirely American-made Switch? Or let's be honest here, North American-made, right? Because it's probably going to end up being made in Mexico. Yes. The problem is that in the meantime, companies might just give up on the U.S. Because you cannot rapidly switch this manufacturing to the United States.

[00:11:55] So it comes down really to a whole complicated question about economics, which was a complicated question that you got to answer in your own household. How are your kids doing with the idea that maybe they will actually get the Switch 2 in the end? They've been thrilled by the moment-to-moment updates. It's been a real up-and-down drama in our household.

[00:12:15] But they are very happy to hear that Nintendo has not moved the release date for the Switch and that they will probably be able to get it at the original $450 price point. Cobble together those allowances. Exactly. That was WSJ tech columnist Christopher Mims. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with Deputy Editor Chris Dinsley. I'm Victoria Craig for The Wall Street Journal.

[00:12:43] We'll be back this afternoon with TNB Tech Minute. Thanks for listening.