21 hours Ago By Benjamin Mayo
The full extent of the U.S. government’s impeding tariffs were revealed by the Trump administration today in a press conference.
The hefty tariffs threaten economic trade on a massive scale with implications on almost all big US companies, including Apple. The Apple supply chain relies on manufacturing and assembly of its devices in countries like China, India, Malaysia and Vietnam. All of these regions are now facing huge tariffs, which ultimately increases the cost of production and undermines Apple’s margins and potential profitability.
Trump announced a base rate of 10 percent tariffs on all imports to the United States, a move that will have significant economic impact on its own. The 10% levy goes into effect on Saturday, April 5. However, the story only gets bleaker as the Trump administration is also instating what it calls “reciprocal tariffs” on select nations where the prices of US exports are said to be inflated by international government measures.
These higher rates are set to go into effect next week, April 9. Some of the heftiest reciprocal tariffs announced today directly target major geographic regions of the Apple supply chain. Most iPhones sold today are made in China, and those imports now face a tariff rate of up to 54 percent, a combination of the 34 percent reciprocal tariff announced today on top of the 20 percent levy the President launched in January.
Following the 2018 trade war and COVID disruptions, Apple has accelerated the diversification of its supply chain away from China as much as it can. But these other regions are also now facing the ire of Trump. For instance, Vietnam is a big manufacturer of AirPods, Apple Watch and MacBook models.
These imports are now facing a 46 percent tariff rate. Similarly, Apple suppliers in India will be hit with 26 percent tariffs, and Malaysia operations will also tariffs as high as 24 percent. Other parts of the Apple supply chain in other countries are now subject to at least a 10% tariff they never had to contend with before.
Trump believes these measures will bring manufacturing jobs back to the U.S. But if everything goes ahead as announced today, this will have a devastating impact on Apple’s business.
The increased cost of production will either see Apple’s margins curbed substantially, or the company will be forced to increase the price of its products to compensate, likely lowering demand as customers are turned away by the resultant sticker shock. These fears have seen investors ditch Apple stock, with a sell-off in after hours trading of more than 7%. In absolute terms, $AAPL closed at $223 today, and is currently sitting at about $207 in the volatile after-hours market.
Many other big tech names are also significantly down, amid a market-wide selloff. Some believe this is all bluster, and Trump will carve out exceptions and pull back on some of these measures in short order. Indeed, during the China-US trade war of 2018, Apple secured tariff exemptions on many of its products, notably avoiding any impact on the iPhone, its biggest business segment.
However, so far, Apple has been unsuccessful at securing exemptions from Trump, since he began his second term in office this January..
