When President Trump first pushed tariffs in China in 2018, Apple began moving more production of iPads and Airpods to India to Vietnam and iPhone.
But with Trump's return to the White House, the strategy may have backfired for the world's most valuable public company.
On Wednesday, Trump said the US would impose tariffs of 46% on Vietnam and 26% on India. The White House says tariffs will take effect soon, but some trade experts consider them to be tentative and are designed to serve as a starting point for negotiations to reduce tariffs overseas.
The proposed tariffs threaten to exacerbate pressure on Apple's business. The company already handles 20% tariffs on products imported from China, which manufactures around 90% of the iPhones Apple sells worldwide. Trump said the fee would be 34% under his new tariff plan.
An Apple spokesman declined to comment.
Apple is the most well-known high-tech company that feels tariff stab, but most other high-tech companies will have a direct or indirect impact. For example, Google and Microsoft have a prominent home appliance business, although they do not rely heavily on international suppliers. Tariffs could also increase the cost of building large, new data centers where businesses plan to build new artificial intelligence technologies.
The new taxation is part of Trump's efforts to remake global trade with tariffs in all countries that charge US exports. US trade officials estimate that India's tariff rate is 13.5% on US goods and 39% tariffs on agricultural products. Vietnam's tariff rate is 8.1% for US goods and 17.1% for agricultural products.
But during a press conference at the White House, Trump said the combination of tariffs, currency manipulation and trade barriers would have a much more significant impact.
As Trump calls it, the “mutual tariff” costs allowed Apple's business to jam. The iPhones, iPads and Apples that the company sells offer three-quarters of approximately $400 billion in annual revenue. Trump says he won't allow products to be exempt from customs duties, so Apple will have to pay these fees.
According to Morgan Stanley, tariffs on iPhones and other devices imported from China will increase Apple's annual costs by $8.5 billion. This will cut the company's profits next year by $0.52 per share, or about $7.855 billion. It will be a hit of around 7% next year's profit.
Apple's shares fell 5.7% in aftermarket trading following Trump's remarks.
“Apple gets these new tariff numbers and put them in the models they built and know how big of a problem they have within hours,” said Anna-Katrina Shedletsky, founder of a Bay Area company that uses artificial intelligence to improve manufacturing performance. She previously worked for Apple.
After Trump took office, Apple's CEO Tim Cook went to the White House and promised that Apple would invest hundreds of billions of dollars in the United States. In February, Apple pledged its promise and invested $500 billion in the country. Much of that money is already part of your spending plan.
During the previous Trump administration, Cook's work to build relationships with Trump helped bypass tariffs on most Apple products. A former Trump administration US trade official did not place tariffs on the iPhone and removed tariffs from the Apple Watch.
In 2019, Trump toured the Apple factory in Texas and built a desktop computer. Cook was standing by Trump as the president praised the factory that had been making computers since 2013.
Since then, Apple has not moved production of a single major product to the US. Instead, it set out to diversify beyond China.
When Trump took office in 2017, Apple began setting up an assembly line for the Indian iPhone. It took five years to train workers, build infrastructure and create the latest iPhones in the country. It is a process of increasing production, and we expect that the country's factories will manufacture around 25% of the 200 million iPhones sold annually.
The company has also begun moving its production of airpods, iPads and MacBooks to Vietnam. After Covid-19 closed its Chinese factories in 2020, the country became a destination for Apple and others, with Vietnamese factories accounting for more than 10% of the top 200 suppliers the company had in 2023.
Vietnam was a fascinating place because it was close to China. India was attractive. This is because Apple wanted to promote the sales of iPhones in the country, the second largest smartphone market in the world.
However, Apple has struggled with US production in the past. The Texas plant where the Mac was built had problems as some workers left their jobs after the transition but were forced to shut down the assembly line by the company before the exchange arrived. I also had a hard time finding a supplier who could create the necessary components, like custom screws.
Cook said the US doesn't have enough skilled manufacturing workers to compete with China. At a meeting in late 2017, he said China is one of the few places where Apple can ensure that they can find people who can run cutting edge machines that Apple produces products.
“In the US, you can have a meeting of tool engineers. I don't know if we can fill the room,” Cook said. “In China, multiple soccer fields can be filled.”
