The Trump administration disclosed the full implications of impending tariffs during a press briefing today. These substantial tariffs pose a serious threat to economic trade, affecting nearly all major U.S. corporations, Apple included.
Apple’s supply chain heavily depends on the manufacturing and assembly of its devices in countries such as China, India, Malaysia, and Vietnam. These regions are now facing significant tariffs, which will drive up production costs and adversely affect Apple’s profit margins and potential earnings.
Trump announced an initial 10 percent tariff on all imports to the United States, a decision that will have considerable economic repercussions by itself. This 10% tariff will take effect on Saturday, April 5.
However, the situation worsens as the Trump administration is introducing what are termed “reciprocal tariffs” on specific countries, where U.S. export prices are allegedly inflated due to foreign government actions. These increased tariffs are set to be implemented next week, on April 9.
Some of the most substantial reciprocal tariffs that were revealed today directly impact key areas of Apple’s supply chain. The majority of iPhones available for purchase are manufactured in China, and those imports are now subject to tariffs as high as 54 percent, comprising a 34 percent reciprocal tariff announced today along with the 20 percent tariff initiated by the President in January.
In response to the 2018 trade war and the disruptions caused by COVID-19, Apple has been expediting the process of diversifying its supply chain away from China to the best of its ability. Nonetheless, these other regions are now encountering scrutiny from the Trump administration.
For example, Vietnam, a major provider for AirPods, Apple Watch, and MacBook models, is now facing a 46 percent tariff rate for these imports.
In a similar vein, Apple suppliers operating in India will be subjected to 26 percent tariffs, while operations in Malaysia may face tariffs soaring to 24 percent. Additionally, other regions involved in the Apple supply chain will be faced with at least a 10% tariff that they had not dealt with previously. Trump asserts that these measures are designed to bring manufacturing jobs back to the U.S.
However, if these changes are implemented as announced today, the repercussions for Apple’s business will likely be devastating. The rise in production costs may severely restrict Apple’s profit margins or compel the company to increase product prices, potentially leading to a decline in consumer demand as customers might be deterred by the increased costs.
These concerns have prompted investors to sell off Apple stock, leading to an after-hours trading drop of more than 7%. In numerical terms, $AAPL closed at $223 today, with an after-hours value currently around $207 in a volatile market. Other major tech companies are also experiencing significant declines amid a market-wide downturn.
Some speculate that this may all be posturing, and that Trump might soon introduce exceptions or retract some of these measures. Indeed, during the 2018 China-U.S. trade conflict, Apple managed to obtain tariff exemptions on many of its products, particularly ensuring that the iPhone—its largest business segment—was not affected. However, up until now, Apple has not been successful in securing any exemptions from Trump since he began his second term in January.
