This is how much the new tariff on iPhones imported from China to the US could cost Apple
Now that President Donald Trump has announced a 10% tariff on Chinese imports shipped into the U.S., Apple will have to pay the import tax on its products manufactured in China and sent to America. The company will have to decide whether to pay for the tax itself or have its customers pay by raising the price of affected products. During President Trump's first term, he gave smartphones from China, including the iPhone, a break. However, some Apple devices were hit by the tariff. How did Apple handle it?
In 2018, some Apple products made in China were affected by the tariffs Trump placed on Chinese imports to the states and Apple ate the additional cost. In other words, the prices of these products in the U.S. were the same before and after the tariffs took effect. As a result, Apple's American customers were not harmed. Instead, Apple and its stockholders had to deal with lower profit margins.
With the new 10% tariff on Chinese imports, Apple will once again have to decide whether it will take a hit on its margins or make its customers pay. How will the company be affected if it decides to eat the costs of the tariff on China? Former Piper, Jaffray analyst Gene Munster, who is now Managing Partner at Deepwater Asset Management, penned a piece on LinkedIn giving his analysis of the situation.
Apple CEO Tim Cook will have a tough decision to make if Trump's latest tariff on China affects Apple devices. | Image credit-Unknow
Munster says that regardless of whether Apple or its customers pay for the tariff, the import tax will have a negative 4% impact on the tech giant's earnings if it is imposed on the iPhone. Munster says that he believes that Apple Watch models produced in China and shipped to the U.S. will be the first to be affected. He also notes that most investors believe that Trump will exempt Apple from paying the import tax.
If Apple splits a tariff on the iPhone with consumers, Munster says that the impact on Apple's earnings will be negative 3.5%. He calculated that result by figuring that the 10% tariff on the iPhone would force Apple to raise the price of the device by 5% which would reduce demand by 2% to 3%. He says that the iPhone makes up 43% of Apple's bottom line.
If Tim Apple is unable to work his usual magic on Trump, it's important to note that 85% of iPhone units are made in China. But Apple is more than just the iPhone. 62% of its product revenue is from devices made in China and could be vulnerable to the tariff.
Apple made $93.74 billion in fiscal 2024. 4% of that figure would be $3.75 billion. If Trump does impose a 10% tariff on iPhone imports from China to the U.S., that's how much it could cost Apple if the company decides to pay the tax instead of having its customers shell it out according to Munster.
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