Apple saw a dramatic $250 billion drop in market value on Thursday, making it one of Wall Street’s biggest casualties of U.S. President Donald Trump’s aggressive tariff strategy. Shares in the iPhone maker plummeted by as much as 8.5% as trading opened in New York, reducing the company’s market capitalisation from $3.37 trillion to $3.12 trillion.
Trump’s latest round of tariffs targets Apple’s largest suppliers and manufacturing hubs in Asia, including China, Taiwan, India, and Vietnam. This aggressive move will affect nearly every Apple product, from iPhones to iPads, Macs, and accessories, which are primarily manufactured in these regions.
As a result of the tariffs, Apple CEO Tim Cook faces a difficult decision. He could either raise prices for its high-end electronics to absorb the new costs, or the company could swallow the added expenses, which would likely result in significant losses. Analysts estimate that the impact could wipe out tens of billions of dollars in profits, profits that Apple investors have long valued.
In February, Apple had pledged to hire 20,000 staff and invest $500 billion in the U.S. over the next four years, including a new facility in Texas focused on manufacturing servers for artificial intelligence. However, despite Cook’s efforts to court the Trump administration, including attending the president’s inauguration and visiting him at the White House, Apple has not secured an exemption from the new tariffs. The White House confirmed that no carve-outs have been made for Apple in Trump’s executive orders, leaving the company vulnerable to the tariffs.
Citi analysts estimate that Apple has more than 90% of its manufacturing operations in China, where it faces tariffs of at least 54% on imports to the U.S. Other Asian manufacturing hubs like Vietnam and India, which produce growing numbers of Apple products, including iPhones, AirPods, and Watches, will face reciprocal tariffs of 46% and 26%, respectively. The one bright spot for Apple is that semiconductors are currently exempt from the new tariffs, which could help protect the company as it relies heavily on chipmaker Taiwan Semiconductor Manufacturing Company (TSMC).
However, the situation is not without further complications. Apple’s planned expansion of its U.S. operations, including TSMC’s Arizona plant, could become more expensive due to a 20% tariff on imports from the EU. This includes critical equipment from the Netherlands-based chipmaker ASML, which Apple relies on.
In the U.S., analysts at TD Cowen estimate that nearly one-third of Apple’s total revenue comes from U.S. sales, with the iPhone making up almost two-thirds of those hardware revenues. The analysts calculate that every 10% increase in tariffs would result in a 3.5-4% reduction in Apple’s net income over the next two years. Meanwhile, Jefferies analysts predict that tariffs could reduce Apple’s net profit by 14% this year unless the company raises prices to offset the fees. Additionally, they warned that the tariffs would disrupt Apple’s supply chain. Even if Apple were exempted from the tariffs, it would need to speed up its efforts to diversify its supply chain, which would likely involve paying its suppliers more.
The full impact of the tariffs on Apple’s operations and profits will unfold in the coming months, but it’s clear that Trump’s trade war is sending shockwaves through the company’s global supply chain.
Source: Financial Times
