Will Apple withstand the pressure of new tariffs? Five ways for the company to adapt from an analyst
Apple is facing difficulties due to the new tariffs imposed by US President Donald Trump, which will come into effect on 9 April. The tariffs will be applied to imports from China, India and Vietnam, and the iPhone and other Apple products are likely to be subject to tariffs of 54%, 26% and 46% respectively.
Here's What We Know
According to Ming-Chi Kuo, a well-known analyst of Apple's supply chain, if Apple does not raise prices, the company may experience a significant drop in gross profit, which could be between 8.5% and 9%. However, Kuo identified five strategies that Apple could use to mitigate the financial impact:
- Increase iPhone production in India: If India is able to obtain tariff exemptions through new trade agreements with the US, Apple could increase iPhone production in the country to more than 30% of its total production. This would reduce the negative impact on margins to 1-3%.
- Increase in prices for iPhone Pro models: High-end iPhone models, which account for a significant portion of new sales in the US, may become more expensive. Kuo notes that high-end consumers tend to be more accepting of price increases, which will help Apple offset the additional costs.
- Increased carrier subsidies for iPhones
- Reducing the cost of exchanging old iPhones: Apple may reduce the cost of exchanging old iPhones to partially offset the price increase due to tariffs.
- Pressure on suppliers to reduce costs: Apple may increase pressure on its suppliers to reduce production costs to offset the increase in costs due to tariffs.
Despite all these issues, Kuo believes that the impact on Apple's profitability will be temporary. In 2024, the company's profitability was 46%, and even if it drops below 40%, Kuo believes that this decline will not last long.
After the announcement of the tariffs, Apple shares fell by more than 9%.
Source: MacRumors
