TLDR
- Apple shares fell about 7-8% in premarket trading after Trump announced new tariffs
- Trump’s “Liberation Day” tariffs impose 34% on China, 32% on Taiwan, 24% on Japan, and 26% on India
- Citi warns tariffs could impact Apple’s gross margin by 9% if no exemption is secured
- Jefferies estimates 37 million China-made iPhones could face 54% tariffs in worst-case scenario
- Apple may need to invest $500 billion to build domestic facilities according to Trump
Apple stock took a serious hit Thursday after President Trump rolled out his “Liberation Day” tariffs targeting key global trading partners. The tech giant’s shares dropped approximately 7-8% in premarket trading as investors reacted to the news.
The tariffs hit Apple’s supply chain particularly hard. China faces a 34% duty on top of existing 20% tariffs, while Taiwan will see 32%, Japan 24%, and India 26%.
This move directly impacts Apple’s manufacturing strategy. According to Citi’s estimates, about 90% of Apple’s manufacturing currently happens in China.
President Trump argued that Apple will need to invest around $500 billion to build domestic facilities since it has built so much of its manufacturing base in China.
The tariffs are set to take effect on April 9, giving the company little time to adjust its massive global supply chain.
Impact on Apple’s Margins
Citi analyst Atif Malik maintained a Buy rating on Apple with a $275 price target. However, he warned of potentially serious consequences.
Malik estimates the tariffs could impact Apple’s gross margin by 9%. This estimate assumes Apple fails to secure an exemption and doesn’t pass higher costs to customers.
The additional 26% tariff on India could further impact Apple’s gross margin by 0.5%, according to Citi’s analysis.
This comes at a challenging time for Apple. The company had been ramping up iPhone production in India through its partner Foxconn.
Plans were in place to increase Indian iPhone production to between 25 and 30 million units this year. This would be more than double last year’s output.
Analyst Perspectives and Worst-Case Scenarios
Jefferies analyst Edison Lee has taken a more bearish stance. He maintained a Sell rating on Apple stock with a price target of $202.33.
Lee’s base case assumes Apple will eventually be exempted from the China tariffs. However, he outlined a concerning worst-case scenario.
If exemptions aren’t granted, approximately 37 million iPhones made in China for U.S. import could face 54% tariffs.
Should Apple absorb 100% of these tariff impacts to protect sales volume, Lee estimates the company’s FY25 net profit could be reduced by roughly 14%.
“We like the Apple supply chain more than AAPL,” Lee stated. He specifically mentioned preferring LY iTech for its capacity in India and Luxshare for its operations in Vietnam.
The analyst believes that even with exemptions, Apple will need to accelerate efforts to diversify its supply chain. This likely means paying suppliers better to facilitate the transition.
Apple has yet to comment on the tariff situation. This silence has added to investor anxiety as the market watches to see how the tech giant will respond.
Taiwan Semiconductor Manufacturing Company (TSMC), a key chip supplier for Apple, is also in the crosshairs with the 32% tariff on Taiwan.
Wall Street remains cautiously optimistic on Apple stock despite these challenges. The average price target stands at $251.21, implying 12.2% upside potential.
However, it’s worth noting that AAPL stock has already declined 11% so far this year, even before this latest tariff news.
Investors are now waiting for more details from both Apple and the Trump administration about how these tariffs will be implemented and whether any exemptions might be forthcoming.
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