Staff Reporter
In recent years, Apple has expanded its manufacturing beyond China, selling iPhones made in India, AirPods from Vietnam, and Mac desktops assembled in Malaysia.
This shift was part of Apple’s strategy to diversify its supply chain and mitigate risks associated with tariffs imposed by the Trump administration, COVID-related disruptions, and chip shortages.
This approach seemed reasonable; however, recent announcements regarding ‘reciprocal tariffs’ have introduced complexities that now impact these alternative production countries.
On Thursday, Apple saw its stock plummet over 9%, leading a decline among tech stocks, while the Nasdaq dropped 6%. This loss wiped out more than $300 billion in market capitalization, marking the worst single-day performance for Apple since March 2020.
“When you consider the reciprocal tariffs on markets like Vietnam, India, and Thailand, where Apple has diversified, there’s really no escape,” said Morgan Stanley analyst Erik Woodring in an interview with CNBC.
To counteract the financial burden of these tariffs, Woodring estimates that Apple may need to raise product prices by 17% to 18% in the U.S. However, uncertainty remains about Apple’s next steps and potential retaliation from China.
“In this environment, it’s important to prepare for the worst-case scenario,” Woodring noted. “It seems both sides in this geopolitical situation are becoming more entrenched.”
Apple CEO Tim Cook acknowledged the situation during a January earnings call, stating, “We are monitoring the situation and don’t have anything more to add than that.”
Apple could potentially secure product exemptions from U.S. tariffs, similar to its approach during the first Trump administration’s tariffs on China. However, if these exemptions are not granted, the tariffs could pose a significant threat to its business.
According to a financial filing from November, “substantially all” of Apple’s manufacturing takes place in China, India, Japan, South Korea, Taiwan, and Vietnam. The company has cautioned investors that these tariffs could negatively impact its operations, lead to price increases, and even result in the discontinuation of certain products.
As it stands, India has a 26% tariff, Japan’s is at 24%, South Korea at 25%, Taiwan at 32%, and Vietnam faces a hefty 46% tariff. China’s tariff rate has now soared to 54%, following a recent increase of 34% on existing tariffs.
In its filing, Apple stated, “The impact can be particularly significant if these restrictive measures apply to countries and regions where the Company derives a significant portion of its revenues and/or has significant supply chain operations.”
Wedbush analyst Dan Ives estimates that relocating even 10% of Apple’s supply chain from Asia to the U.S. could take three years and cost around $30 billion, likely causing major disruptions along the way.
Earlier this year, analysts predicted only minor declines in Apple’s earnings per share under the new trade regime, based on the idea that the company could utilize its secondary production sites to sidestep tariffs on goods imported from China.
Now, analysts are recalibrating their projections, weighing the balance between potential price hikes for consumers and absorbing the additional costs themselves. Historically, Apple raises prices primarily with new product launches, and the company is expected to release new phones in September.
