According to the reciprocal tax policy announced by US President Donald Trump, goods imported from India are subject to a 26% tariff.
When President Trump first imposed tariffs on China in 2018, Apple began shifting much of its iPhone production to India. Donald Trump's latest move has increased pressure on Apple's business.
The total tariff on goods imported from China also reaches 54%. Therefore, the cost of importing iPhones into the US, Apple's largest market, will certainly increase.
Price increases are unavoidable.
According to TF International Securities analyst Ming-Chi Kuo, Apple could avoid the worst impact of tariffs by shifting more of its manufacturing operations to India or relying on other cost-saving tactics.
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Ultimately, consumers will still bear the cost if Trump imposes tariffs on Apple products. Photo: Bloomberg. |
However, these measures will not eliminate the financial pressure, making a price increase a far more viable option. If Apple doesn't raise prices, Kuo suggests it could lose up to 9% of its gross profit margin. Regardless of how the iPhone manufacturer responds, consumers will ultimately bear the cost.
"With 85-90% of Apple's hardware assembly located in China and the remainder in India, the Trump administration's new tariffs — imposing 54% and 26% respectively — will significantly increase the cost of exporting hardware to the U.S. If Apple maintains its prices, its overall gross profit margin could fall significantly, estimated at 8.5-9%," Kuo said.
Tariffs, or import taxes, are taxes levied on products imported across borders. To pay these taxes, Apple has three options: reduce the amount paid to manufacturing plants in China or India, cover the tax costs itself, increase phone prices in stores, or combine all three.
Therefore, AppleInsider suggests that there is still a scenario where Apple keeps the selling price the same and accepts a decrease in profit. However, that is only a short-term strategy. Apple shareholders expect profit, not sacrifice.
For investors, a profit drop of 8.5-9% is clearly unsustainable. Therefore, AppleInsider suggests that Apple is likely to raise prices, even if it does so as discreetly as possible.
There are no exceptions for Apple.
During 2018, when President Trump first imposed broad tariffs on imported goods from the US during his first term, Apple remained unaffected despite the fact that iPhones are largely manufactured in China.
During that same period, Tim Cook became a familiar face at the White House, frequently meeting with Mr. Trump.
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Tariffs on iPhones and other devices imported from China will increase Apple's annual costs by $8.5 billion . Photo: Nhat Minh. |
According to the Washington Post , during Trump's first term, the Apple CEO persuaded the White House to waive tariffs on most of the products the company sells.
Cook reportedly told White House officials at the time that tariffs would increase the price of smartphones, Macs, and iPads, and harm Apple.
He even tried to convince Trump of the idea that tariffs on iPhones would benefit Samsung, Apple's main rival in South Korea.
This led to another strategy: shifting more manufacturing activity to India. Although the country already has a relationship with the US, Trump made it clear that there would be no exceptions.
This means Apple could face high tariffs regardless of where it moves its manufacturing operations.
In fact, shifting manufacturing operations to India could reduce profit losses to just 5.5-6%, or even 1-3% if manufacturing in India experiences strong growth. However, this comes at the cost of establishing or expanding manufacturing infrastructure.
AppleInsider believes Apple will not bear that cost itself, at least not in the long run. This cost will be passed on, even if "disguised" as price adjustments or a decrease in product value over time.
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iPhones are likely to see a price increase to offset the cost of tariffs. Photo: The Disconnekt. |
Kuo agrees with this and further mentions more consumer-oriented strategies, such as increasing carrier subsidies and quietly cutting trade-in discounts. While these might make the new iPhone look cheaper, the actual cost could skyrocket.
More importantly, carrier subsidies often come with expensive plans, longer contracts, and more restrictions. Additionally, lower trade-in values mean customers receive less money for their old devices.
This is also another way for Apple to shift the financial burden back to buyers. Accordingly, the iPhone manufacturer can also put more pressure on its suppliers, forcing them to cut costs.
This sounds easy in theory, but it's rarely the case. According to AppleInsider , suppliers under pressure might respond by cutting quality, delaying support, or refusing to innovate.
This could lead to a compromise in quality and reliability. When that happens, it's the customers who end up paying for repairs, replacements, or warranty disputes. Even if Apple's profit margin falls below 40%, the risk is still greater than an economic downturn.
Source: https://znews.vn/iphone-se-dat-len-vi-thue-doi-ung-cua-ong-trump-post1543410.html
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