Donald Trump, President of the USA, has announced multiple tariffs on imports and exports from the US. This will affect Apple a lot since a lot of Apple’s manufacturing hubs are in China. Apple heavily depends on China and other countries like Vietnam for the manufacturing of iPhones. These tariffs will mostly affect the pricing of iPhones in the future.
For products imported to the US from China, the tariffs are extremely high, at about 54%. As per analysts from Reuters, this might make the top-end iPhone skyrocket in pricing, hitting $2300. To combat these tariffs, Apple might have to increase the prices by 43% to keep the same margins as before.
Apple currently has four broad options:
- The company absorbs the costs and keeps the prices the same (Highly unlikely)
- Apple passes on the extra tariffs to the customers, which will result in a price increase.
- Reduce the BOM (Not viable)
- Negotiate deals with the US government for tax relaxations.
It’s worth noting that while the tariffs are 54% for Chinese imports, the tariffs are comparatively much lower for South Korea. The tariffs are about 25% for South Korea, and this means Samsung might have a major pricing advantage against the iPhones this time.
These tariffs are terrible news for the consumer electronics market in general. While China has a lot of revolutionary new technology, these tariffs make it very economically unpleasant to import anything from there. It also massively impacts e-commerce apps that import goods from China and sell in the USA. This also severely impacts the presence and future scope of Chinese companies ever entering the USA. While OnePlus has recently made attempts to try and enter the USA market, the company may not be able to compete strongly on the pricing anymore.
While Apple has tried to diversify manufacturing and enter other countries, China is still its biggest supplier. A 128GB $799 iPhone model might now cost a whopping $1142, which is nearly the same price as a Pro Max iPhone with 256GB at the moment. This is a calculated estimate from Rosenblatt Securities. If Apple isn’t absorbing the costs, we’re looking at such prices for 2025 iPhones.
The most expensive 16 Pro Max model with 1TB of storage currently costs 1599$. After the new tariffs, it could be $2300. The new iPhone 16e model for $599? That will see an increase to $856 after the new tariffs are implemented. Apple’s stock market shares also hit their worst day since March 2020 (pre-lockdown growth surge), down by a full 9.3%, so investors and shareholders are absolutely not happy.
As per Angelo Zino, an equity analyst at CFRA Research, Apple won’t pass on more than 5 to 10% of the cost to customers since people are already upgrading their devices way slower than before, and a higher price will make upgrades even less likely. The prices will mostly stay the same until the next Apple event, at the very least.
Earlier, Apple always got exceptions in terms of taxes and tariffs from the government. This time, no such exception has been granted yet. However, it’s likely that Tim Cook might negotiate with Donald Trump to secure some exceptions since Apple is a very important company for America as a whole. Apple has not yet publicly commented on the new tariffs.
