Over the weekend, U.S. President Donald Trump imposed a fresh 10% tariff on imports from China, raising concerns about its potential impact on Apple Inc. (NASDAQ:AAPL). Given Apple’s extensive reliance on Chinese manufacturing, investors are keen to understand how this move might affect the company’s supply chain and earnings.
During the last tariff cycle, Apple successfully secured an exemption for iPhones. However, according to Bank of America (BofA) analysts, it remains uncertain whether the company will be able to do so this time. If Apple fails to obtain an exemption, it could face higher costs for Chinese-made products entering the U.S. market.
BofA analysts suggest that Apple’s exposure to the new import duty is “manageable.” They estimate that about 80% of Apple devices sold in the U.S. can be sourced from outside of China, meaning the company has some flexibility in its supply chain.
If Apple absorbs the tariff costs instead of passing them onto consumers, BofA predicts a negligible $0.05 negative impact on earnings per share (EPS). On the other hand, if Apple chooses to raise prices by approximately 3% in the U.S., it could offset the cost impact, though it might sell fewer units. Given the relatively minor financial impact, analysts believe that Apple may decide not to increase prices immediately.
One of Apple’s strongest defenses against tariffs is its ability to shift production to alternative locations. BofA highlights that:
Most iPhone models can now be manufactured in India
Other Apple products, such as AirPods and MacBooks, are produced in Vietnam and Malaysia
Even if half of Apple’s U.S.-sold devices still originate from China, BofA estimates that Apple’s EPS impact would be a negative $0.12 if prices remain unchanged and a negative $0.07 if Apple raises prices to offset costs.
Overall, BofA maintains a positive outlook on Apple’s ability to navigate the tariffs. The company’s diversified manufacturing network, coupled with its ability to implement strategic pricing adjustments, should help mitigate any negative effects. Investors will be closely monitoring Apple’s supply chain decisions and pricing strategies in the coming months.
While the new tariffs introduce some short-term uncertainty, Apple appears well-positioned to manage the impact. If you’re an investor tracking Apple’s financial health, monitoring key financial metrics such as revenue, margins, and supply chain adjustments is crucial.
For deeper insights into Apple’s financials, including its full financial statements and key metrics, you can access real-time data through Financial Modeling Prep.
Read More
