After slapping a first 20% tariff on imports from China last January, the administration has added a further 34% retaliatory tariff to the existing tariff, taking it to 54%.
The policy, aimed at promoting domestic production, can heavily influence consumer prices, especially Apple’s flagship smartphone.
Apple, which produces the majority of its 200 million iPhones each year in China, is now in the crosshairs of these economic policies.
The most recent round of tariffs will compel the tech giant to either absorb increased costs or pass them along to consumers—resulting in significant price hikes.
iPhones Among the Hardest Hit
Apple’s high-margin business model leaves it with few alternatives. Analysts say that if the company were to push costs onto customers, iPhone costs might increase as much as 43%. Wedbush Securities’ Daniel Ives estimates that in such a scenario, an iPhone might reach up to $2,300. Even the cheapest iPhone 16e, now at $600, might have its cost increase to $858, as per a report by USA Today.Industry analysts believe Apple will try to pass on some of the tariff costs, leaving only 5% to 10% of the burden to the consumer.
CFRA Research analyst Angelo Zino expects Apple to hold off on significant price increases until the iPhone 17 comes out later this year.
Apple’s Stock Takes a Hit
In the wake of fears over the tariffs’ financial cost, Apple’s shares fell 9% on Thursday to close at $203.18.
The steep drop was the company’s worst since September 2020, echoing wider market concerns over rising trade tensions.
Though the Trump administration previously slapped tariffs on Chinese imports, it previously exempted iPhones.
In this case, no such exemption was given, leading to speculations that Apple may approach the White House for talks to get relief.
Can Apple Get an Exemption?
Apple CEO Tim Cook has kept on good terms with Trump, visiting his inauguration and promising a $500 billion investment in U.S. operations, including a Texas plant and 20,000 new research and development positions.
Even with these gestures, analysts are not convinced that Apple can escape the tariffs.
Barton Crockett of Rosenblatt Securities estimated that tariffs would cost Apple as much as $40 billion.
Zino agreed, indicating that while there is still an outside chance an exemption might happen, investors can’t count on it, as per a report by USA Today.
He added that Trump’s current positions on China are much more hostile than during his first term.
Moving Manufacturing to the U.S.
The tariffs aim to force companies to produce in the U.S., but analysts claim this is not practical. It will lead to immediate price hikes for American consumers in an already inflationary environment, says Counterpoint Research.
Producing smartphones locally would demand huge subsidies, reduced labor costs, and substantial infrastructure investment.
Neil Shah, Counterpoint’s vice president of research, downplayed the possibility, saying, “There is zero cost advantage in manufacturing in the U.S.” Wedbush Securities’ Ives put it at three years and $30 billion to move just 10% of Apple’s supply chain out of Asia.
For U.S. consumers, the reality of a $1,000 iPhone being among the best-made consumer goods would evaporate,” Ives said. “In theory, it sounds good to make iPhones here, but in practice it’s still an unrealistic dream.
FAQs
What tariffs did Trump impose that affect Apple?
The new tariffs include a 54% levy on goods imported from China, a 26% tariff on imports from India, and a 46% tariff on imports from Vietnam—three key regions in Apple’s manufacturing supply chain.
How much did Apple’s stock decline?
Apple’s shares fell by over 9% following the tariff announcement, marking its worst single-day decline since September 2020.
