With a 54% Tariff and a $2,300 iPhone, There’s No Easy Way Out for Apple

President Donald Trump has announced a tariff package that will rattle markets and put Apple in the crosshairs. The company, which manufactures most of its devices in Asia, faces tariffs of 54% on products from China, 46% from Vietnam, and 26% to 27% from India—the countries where it has concentrated its production.

Apple bet on diversifying its production after Trump’s first term, but this strategy has backfired as the new tariffs affect all its current manufacturing sites. There’s no way out.

Why it matters. The impact on Apple is twofold: financial and industrial. The company relies on its devices to generate 75% of its nearly $400 billion in annual revenue—the rest comes from services.

This tariff imposition could increase its annual costs by about $8.5 billion and reduce its profits by about 7%. Like many other tech companies—though Apple more than most—its stock has felt the impact, down 9% and another 5% in Friday’s premarket.

So, what now? Apple’s options are limited, and none are ideal:

• Absorb the cost of the tariffs, which would erode its profit margins, which are as comfortable (around 25%) as they’re sacred to management and investors.
• Pass the cost on to consumers through significant price increases. Apple has a much less elastic demand than other brands, but its average prices are already near what consumers can afford.
• Combine both strategies, spreading the impact and hoping the result is as favorable as possible to its interests.

Another option is to seek a tariff exemption like the one it obtained during Trump’s first term.

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The numbers. According to Reuters, Rosenblatt Securities projects that Apple would have to increase the price of its devices by as much as 43% to maintain its current margins. That would mean:

• A base iPhone 16 would go from $799 to $1,142.
• An iPhone 16 Pro Max with 1TB of storage could reach $2,300 (up from $1,599).
• Even the iPhone 16e, launched in February at $599, would rise to $856.

The context. Apple has cultivated a relationship with Trump for years, allowing it to avoid tariffs during his first term. CEO Tim Cook attended Trump’s inauguration and promised significant investments in the U.S. He has welcomed Trump’s presidency more openly than in 2017.

In February, Apple announced a $500 billion investment plan in the U.S., including a plant in Texas and 20,000 research and development jobs. So far, however, the company hasn’t secured the exemptions it received in 2018.

Background. Cook has commented several times on the difficulty of producing in the U.S., citing reasons such as a lack of qualified personnel in this specific field.

Despite its enviable position in terms of sales inertia, margins and market capitalization, Apple has already experienced some turbulence. For example, iPhone sales aren’t expected to grow, and implementing AI systems has proved difficult. Now, there’s a tariff crisis.

In short. The clash between the Trump administration and companies like Apple (though not only Apple) reflects two opposing views of the economy: national protectionism versus optimized globalization.

On the consumer side, the message is clear: Users can expect significantly more expensive iPhones. For Apple, there’s less room for innovation due to reduced profits. In any case, it will depend on the company’s response—whether it secures an exemption or negotiates a solution before April 9.

Image | Stephen L (Unsplash)

Related | China Responds to U.S. Tariffs by Attacking One of Its Vulnerabilities: Rare Earth Elements