Apple CEO Tim Cook Optimistic About U.S.-China Trade Talks

Enlarge this image toggle caption Bebeto Matthews/AP Bebeto Matthews/AP

Apple CEO Tim Cook says he's optimistic about trade talks between the U.S. and China. His remarks come as representatives from both countries are scheduled to meet later this week in Beijing.

"Both sides are talking and I always think that is always the essential thing to reaching an agreement," Cook told NPR on Monday. "... It's in both parties' best interests to come together."

Apple has much to lose if the talks don't go well. China has been a key part of Apple's growth. Analysts say close to 20 percent of the company's business comes from China and Taiwan.

A March 1 deadline looms over the talks. The Trump administration says if an agreement is not reached by then over issues such as intellectual property rights, it will increase tariffs on Chinese imports from 10 percent to 25 percent.

Much of Apple's growth in China has come from the sales of its marque product — the iPhone. However, Apple had to revise its earnings forecast downward in the winter quarter, largely due to slower iPhone sales in China.

Cook attributed slower sales in China in part to the devaluation of the yuan. "Because the local currency devalued over the course of the year," he said, "our prices did go up there, more so than did in regions that are U.S. dollar denominated."

In response, Cook said, Apple has cut prices in China to be in accord with prices before the currency devaluation. "We'll see how that works out for us," he said.

If the U.S. and China fail to reach an agreement by March 1, and the U.S. raises tariffs to 25 percent, analysts say, Chinese officials may retaliate and punish U.S. companies doing business there, further dampening Apple's ability to compete in one of the world's largest markets.

Despite slowing iPhone sales, Apple is seeing growth in other areas, especially in services — which include Apple Pay and Apple Music. Apple reported services brought in a record $10 billion in the winter quarter.

The company is also investing heavily in health care, rolling out features such as an electrocardiogram that helps detect heart problems using its Apple Watch.

Over the last year, Apple has also been in the process of rolling out a service that stores medical records from a variety of hospitals and providers in one place. On Monday, it announced a new partnership with the U.S. Department of Veterans Affairs, which will allow veterans using the VA's health services to use the Health app on iPhones.

Cook says the app provides veterans with the ability to view their allergy conditions, lab results and medications in one spot. "This is part of our overall effort to really empower the patient," he said. "We can't wait to serve ... a population of folks that we really have great reverence for."

The app will allow a veteran to visit a doctor and be able to immediately share records without having to contact the offices of other clinicians and providers.

Last March, Apple rolled out this service to other health care providers such as Stanford Medicine, NYU Langone Health and Johns Hopkins Medicine.

A report by research firm CB Insights said "the market opportunity in healthcare is huge, and Apple sees healthcare and wellness as a core part of its app, services, and wearables strategies." The report said global spending in health care exceeds $7 trillion a year, dwarfing the size of the smartphone market.

Officials at the VA and leaders at other health care facilities say Apple's strong emphasis on security and privacy is part of the reason they are partnering with the company on health records. Cook has been a vocal proponent of privacy, calling out companies like Facebook for using the personal data of its users to sell lucrative ads.

While Cook may be optimistic about China-U.S. relations, Apple may need to look elsewhere if it wants to keep up the pace of growth it's had for some 15 years.