Apple Inc. is facing a potential financial blow as US President Donald Trump has announced sweeping tariffs targeting overseas production hubs. With more than 90% of Apple's manufacturing based in China, the tech giant is particularly vulnerable to these new trade policies.
Trump's new tariff structure includes a 34% tariff on Chinese imports —over and above the existing 20% levy — and a 26% tariff on Indian imports, among other affected countries. These tariffs, set to take effect on April 9, could significantly impact Apple's bottom-line. Given that Apple relies almost entirely on Chinese manufacturing, the cumulative 54% tariff on China-based production could erode its profit margins substantially.
If Apple fails to secure an exemption from these tariffs and absorbs the additional costs rather than passing them on to consumers, Citi estimates a 9% hit to its gross margins — raising concerns about the company's profitability and the price of iPhones.
The additional 26% tariffs on Indian production would have a smaller but still notable impact of around 0.5% on gross margins, considering Apple manufactures the remaining 10% happens in India.
Will these financial implication force the Cupertino tech giant's hand to raise prices for products remains to be seen. Citi said it is waiting for more details from the Apple and the Trump administration on how the tariffs will be implemented.
Apple Shares Decline
The shares of the company fell 5.6% in late trading after Trump announced tariffs during a White House event on Wednesday. Though the company has been making a move to diversify its production away from China, it is still dependent on the country for its production.
The shares of Apple fell as much as $211.32 in extended trade post the closing of the markets on Wednesday. The shares had closed at $223.89 apiece. The shares have decline over 11% this year.
Trump Tariffs Spare None
The US imposed sweeping tariffs on multiple trade partners, with rates as high as 49% on Cambodia, 36% on Thailand, and 34% on China.
The European Union faces a 20% tariff, while Japan and South Korea will see levies of 24% and 25%, respectively.
Even allies like Israel (17%) and the UK (10%) aren't exempt. Switzerland faces a 31% tariff, and Vietnam has been marked for a 46% levy. The higher-than-baseline tariffs will take effect from April 9.
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