Last week, the Trump administration announced an extreme tariff plan on essentially every other nation in the world. This would make imports far more costly, and as a result, Apple's stock fell nearly 10% on the news. Given the fact that everything about Apple's supply chain relies on strategic overseas manufacturing, this is awful news for the company.
However, Bloomberg's Mark Gurman lays out some ideas on how Apple could mitigate these tariffs.
First things first, Apple hasn't increased the base price of the higher-end iPhone since the iPhone X in 2017. It's always remained at $999, and Apple would like to keep things that way. Most Apple products haven't had significant price changes over the past decade.
However, President Trumps tariff plan threatens that. With 54% tariffs on China, 26% tariffs on India, 46% on Vietnam, and even more on other countries, that means Apple cannot simply continue to sell its products at its current prices.
Granted, some countries like Vietnam and India are actively working on trade deals with the Trump administration, prior to the tariffs starting on Wednesday, April 9th.
All of that aside, Bloomberg's Mark Gurman lays out some ideas on how Apple can mitigate these tariffs:
- Pushing component makers and manufacturers to provide better prices, allowing Apple to lower its manufacturing prices
- Apple itself eating some of the costs – it has a roughly 45% profit margin on average
- Short term price adjustments while Apple is in ‘assessment mode'
- Continuing to diversify its supply chain, which likely won't involve manufacturing in the US
As mentioned earlier, some countries are working out trade deals. China currently isn't one of them. For Apple to continue to sell products at palatable prices, it has to reduce its China dependance drastically.
In the meanwhile, Apple has reportedly been stocking up products in preparation for these tariffs. By mass importing products before the tariff dates, Apple can continue to sell products at normal prices, at least for a little while:
The company has taken another step to soften the blow. Along with many peers, Apple has been stocking up on inventory stateside for months in anticipation of the tariffs. Units already on US land aren't subject to the levies. That means Apple theoretically could hold off until the next iPhones in September to make adjustments, if it ultimately does so. The main drawback there is that the company risks making the price hikes the news — rather than its hardware upgrades.
Gurman clarifies that Apple ultimately isn't scared of raising prices, but the company is going to try to do everything it can to make the tariffs as little of a pain as possible. It's also possible that Tim Cook fights for an exemption, as he did during President Trump's first term.
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