Trump tariffs to hit tech heavyweights, chip giants could be next

President Donald Trump’s 10% tariffs on goods made in China take effect Tuesday, putting electronics ranging from PCs to smartphones in the crosshairs. Trump has also signaled that he is considering tariffs on chips and products associated with chips, which could put further pressure on the tech industry.

The tariffs on Chinese-made goods are part of a package Trump has put into place on China, Canada, and Mexico. On Monday, Trump said he was pausing tariffs on Mexico for a month after productive talks with Mexican President Claudia Sheinbaum.

Read more: The latest news and updates as Trump’s tariff deadline approaches

The tech industry depends on manufacturing facilities in China to build the electronics Americans rely on. It’s up to each company to determine how it will respond to the 10% tariff. While some might be able to absorb the impact, paying for it themselves, others will have to pass the cost on to their customers, driving up the prices of consumer and enterprise products.

And if Trump decides to enact tariffs on chips, those goods could end up costing even more money at a time when consumers are still grappling with inflation.

“It’s going to have a pretty significant impact,” John Vinh, KeyBanc Capital Markets equity research analyst, told Yahoo Finance in a live interview. “As those prices increase, we think there’s probably going to be a negative impact to end demand. And ultimately that’s going to flow upstream to all the chip companies.”

Shares of chip stocks including Nvidia (NVDA), AMD (AMD), and Intel (INTC) were broadly down in late-afternoon trading Monday.

Apple (AAPL) is perhaps the tech company most at risk from Trump’s initial round of tariffs on China. The company has a massive manufacturing base in the country, which means everything from the iPhone and iPad to the MacBook Pro is facing 10% tariffs.

Add 10% to a base iPhone 16 Pro, which costs $999, and you’re looking at an increase of $99. Slap an extra 10% on the cost of a $1,599 MacBook Pro, and consumers will be on the hook for an extra $159. Apple could always swallow all or part of the 10% tariff, but that will dent profit margins.

According to BofA Global Research analyst Wamsi Mohan, Apple could be forced to rely on manufacturing facilities in other countries to avoid the majority of the tariff impacts. Mohan estimates that if Apple can source 80% of products from outside of China, the company will only face a $0.05 impact on earnings.

But if it can only source 50% of its devices, that number rises to between $0.07 and $0.12 depending on whether Apple raises prices.

Story Continues

Apple has been working with manufacturing partners in India over the last few years to ensure it can build the latest iPhone in the country, giving it a solid base to pull devices from.

While working around these tariffs is doable for a company like Apple, Trump has also floated the idea of raising tariffs as high as 60%, which would have far larger implications for the iPhone maker and its customers.

Trump provided Apple with tariff exemptions during his first term in office and could do so again this time around. But so far, he hasn’t.

While Trump’s latest tariffs don’t hit the most advanced chips on the market, he has already signaled that he plans to levy separate duties on them in the future. That would force chipmakers to either raise prices on their goods or deal with the increase on their own.

If chip companies do raise prices, the increase would be passed down to device partners, including PC manufacturers, which could deal with the higher costs or simply pass them on to consumers and enterprise customers.

For companies like Amazon (AMZN), Google (GOOG, GOOGL), Meta (META), and Microsoft (MSFT), which are pouring money into AI chips, any price increase would mean having to pay far more to build out their data centers.

Tariffs won’t get chip companies to start building manufacturing facilities overnight either. It takes years to construct a semiconductor fabrication plant, or fab. And while companies like TSMC and Samsung are building chip fabs in the US, they will still rely on facilities in other countries as well.

Wedbush analyst Dan Ives, however, says the risk to chip companies is low in the near term, especially as it relates to the AI trade.

“Tariffs are not going to dent the AI Revolution trade as we continue to believe even if the tariffs continue for some time (60 days-90 days) there will be exemptions to this policy which likely include Apple products and Nvidia chips,” Ives wrote in an investor note.

Still, there’s no guarantee that a trade fight would be that short-lived or that companies will get carve-outs as they previously did. It’s all in Trump’s hands for now.

Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

For the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here

Read the latest financial and business news from Yahoo Finance