Analysts are sharing their thoughts on what will happen to Apple if President Donald Trump’s threat of new tariffs on iPhones goes into effect. Days before a summit with Chinese President Xi Jinping, President Trump warned that he might slap a 10 percent trade tariff on iPhones and laptops imported from China.
“Maybe. Maybe. Depends on what the rate is,” Trump said in an interview with The Wall Street Journal (WSJ). “I mean, I can make it 10 percent, and people could stand that very easily.”
Apple’s products are currently exempt from the trade tariffs, but the company’s stock was down nearly 2 percent in after-hours trading. While Apple declined to comment on this recent report, there has been speculation that Apple would have to raise prices on some of its products if they were subject to the tariff on Chinese imports. If the tech giant doesn’t raise prices, it could take a hit to profit margins.
While Trump’s threat of a 10 percent tariff on iPhones “could simply be a negotiating tactic ahead of the G20 Summit later this week,” UBS said, the firm estimated that a 10 percent tariff would represent a $1.5 billion hit to Apple’s earnings. If the tariff goes up to 25 percent, UBS said “the impact would be [about] $3.8 billion or $0.83 in [earnings per share (EPS)],” according to CNBC.
Wedbush believes the threat of higher tariffs “is all part of a broader negotiation with China as talks heat up over the next week.”
Baird noted that “there’s little question that higher iPhone prices, due to potential tariffs, would likely negatively impact demand and profitability at some level. We certainly acknowledge the near-term risk, but remain positive on the long-term position and would buy on weakness. …Tariffs on imported iPhones and Macs could force [Apple] to raise prices, which in turn would likely dampen overall demand. Reduced demand in the U.S. would also negatively impact the assembly of iPhones and other Apple products in China. It’s a lose-lose scenario.”