Trump’s tariffs could lead to the price of an iPhone rising by up to 43 per cent, according to analysts at Rosenblatt Securities. The most expensive iPhone 16 Pro Max would cost about $US2300 ($3854), up from $US1599 today, while the cheapest would cost $US1142, up from $US799.
Alternatively, swallowing some of the price increases would lead to a huge hit to the company’s famously healthy profit margins – knocking tens of billions of dollars off its bottom line.
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On Thursday, the first trading session after the tariffs’ announcement, Apple’s shares slumped 9.3 per cent, wiping $US311 billion off the company’s market value – the second-biggest one-day fall in a company’s value in history (the drop was only eclipsed by Nvidia’s $US600 billion sell-off in January). Losses have continued to mount since then before a rebound overnight after Trump announced a pause on some of his tariffs.
“The tariff situation really complicates things for Apple. What is it going to do? Raise prices? That will hit demand. Absorb costs? That will hurt earnings and margins,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial Services. “It is very difficult to assess prospects from here.”
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The risk became more acute with Trump announcing overnight tariffs would rise to an unprecedented 125 per cent for China after Beijing retaliated against previous tariffs with its own levies on US imports.
The White House confirmed that unlike in 2018, there were no carve-outs for the products that Apple makes.
The blow threatens to raise questions over Cook’s years-long courting of Trump, as well as a generational shift away from China. While the strategy seemed prescient in a bilateral trade war, Trump has hit almost every country with import duties.
Cook was the architect of Apple’s shift to China a quarter of a century ago, and then its gradual decoupling. Hired in 1998, shortly after Steve Jobs returned to save the company, he moved production from the US to set up a complex but devastatingly effective Chinese supply chain using contractors such as Foxconn.
In recent years, he has sought to unwind this, jostling partners to set up factories in other Asian countries.
Illustration: Michael Howard.Credit: Michael Howard
“Trump’s new policies have thrown a wrench into Apple’s supply chain gears, essentially negating the tariff-hopping that Apple targeted through diversifying production geographies,” says Mark Zetter, an electronics supply chain expert.
“Apple moved some production to countries like Vietnam, Thailand, Malaysia, and India when the world was less polarised. But these strategies no longer apply.”
Vietnam, where Apple makes AirPods, iPads and Apple Watches, was one of the worst hit by Trump’s new tariffs, receiving a tariff rate of 46 per cent.
While this is lower than the 54 per cent effective rate in China, it does not account for the heavy investments Apple and its manufacturing partners have made to move some production to the country. China may also have a stronger chance of tariff relief: Trump said on Thursday that Beijing could secure concessions if it approved the sale of TikTok’s US business.
Apple has also faced a political backlash for decoupling from China, which accounts for about 15 per cent of Apple’s revenue.
Authorities have reportedly prevented skilled employees from leaving the country, and the company has faced muted criticism in state media. This may also have had an impact on Apple’s own sales in China, which have fallen for two years in a row.
This year, Apple is expected to make around 15 per cent of its iPhones in India, and ministers in the country have said the company plans for a quarter of production to be based there. That now remains an open question, with the country facing a 26 per cent US tariff as well.
Apple has not been the only company to move production out of China in an attempt to avoid tariffs.
Nike, on whose board Cook sits, sources about 50 per cent of its footwear from Vietnam, with the rest from China, Indonesia and Cambodia. Its clothes are made in the same countries.
Shares in the sportswear brand were down as much as 12 per cent on Thursday as investors dumped the stock. The slide wiped more than $US10 billion off Nike’s value in one day, seen by some as payback for the company, which has been reluctant to give in to Trump’s anti-DEI push.
Tariffs may be rescinded, and Cook will inevitably be seeking to use his relationship with Trump to push for leniency, whether through lower tariffs on some countries or through exemptions. He has already promised to invest $US500 billion in the US over the next four years.
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Trump’s answer may simply be demanding that Apple brings production home.
At present, only a small number of high-end Mac computers are made in America. The president would see it as a vindication of his policies if the stamp on the back of the iPhone said: “Designed by Apple in California, made in America.”
Zetter says there is no chance of that. “There is no single location in the Americas that can amass a workforce of 800,000-plus like Foxconn can in China,” he says. “Apple currently has extremely limiting options beyond exemptions and negotiations.”
To date, Cook has deftly handled an unpredictable president. But this week may represent his biggest test yet.
The Telegraph, London
