The full ramifications of the impending tariffs set by the U.S. government were disclosed by the Trump administration during a recent press briefing. These substantial tariffs pose a significant threat to economic trade, affecting nearly all major U.S. companies, including Apple.
Apple’s supply chain depends heavily on the manufacturing and assembly of its devices in countries like China, India, Malaysia, and Vietnam. As a result, these regions will now face hefty tariffs, leading to increased production costs that could compromise Apple’s profit margins.
Trump has announced a baseline tariff rate of 10 percent on all imports into the United States, a decision that will have considerable economic repercussions. This 10% tariff is set to take effect on Saturday, April 5.
Unfortunately, the situation worsens, as the Trump administration is introducing what it terms “reciprocal tariffs” on certain nations where the prices of U.S. exports are perceived to be inflated by actions taken by foreign governments. These increased rates will come into effect on April 9.
Some of the highest reciprocal tariffs announced today directly target regions crucial to Apple’s supply chain. Most iPhones sold currently are manufactured in China, which will soon face a staggering tariff of up to 54 percent—this includes a 34 percent reciprocal tariff on top of the 20 percent levy that was implemented in January.
After experiencing the trade war of 2018 and disruptions caused by COVID-19, Apple has been pushing to diversify its supply chain away from China. However, these alternative regions are now also facing scrutiny from the Trump administration.
For example, Vietnam is a key manufacturer of AirPods, Apple Watch, and MacBook models, and these imports will now be subject to a tariff rate of 46 percent.
In addition, Apple’s suppliers in India will face 26 percent tariffs, while operations in Malaysia may also encounter tariffs up to 24 percent. Other parts of Apple’s supply chain in different countries are now subjected to a minimum tariff of 10%—a new challenge they had not faced before. Trump believes these actions will bring manufacturing jobs back to the U.S.
If these measures proceed as announced, they could have a catastrophic effect on Apple’s operations. The rise in production costs may significantly reduce Apple’s profit margins or compel the company to raise product prices, which could reduce demand due to potential customer reluctance from increased pricing.
Such apprehensions have led investors to sell off Apple stock, causing a decline of over 7% in after-hours trading. Apple’s stock closed at $223 today, but has fallen to around $207 during the volatile after-hours session. Other major tech companies have also seen considerable drops in stock prices amidst a wider market sell-off.
Some believe this is merely posturing, and that Trump may soon provide exceptions or retract some of these policies. In fact, during the 2018 China-U.S. trade war, Apple successfully received tariff exemptions for numerous products, particularly avoiding impacts on its iPhone segment, which is its largest revenue source. However, Apple has failed to secure any exemptions from Trump since he began his second term in office this January.
