What Trump’s proposed China tariffs would mean for Apple’s profits | Wilnesh News
President-elect Trump’s proposed tariff strategy may bring bad news to the technology hardware market, but Tim Cook’s Apple may not feel as much pain. On the campaign trail, the former president vowed to impose general tariffs of 10% to 20% on all imports and impose tariffs of at least 60% on goods from China. However, some analysts said Apple’s high gross margins may provide a cushion, unlike other companies with lower profit margins and significant exposure to Chinese manufacturing. “While Apple is considered the ‘poster child’ for leveraging Chinese manufacturing and therefore faces the greatest risk if tariffs are imposed, given their concerns, Morgan Stanley analyst Erik Woodring noted in a note this month that Apple told clients in a report that gross margins were higher than peers, limiting the impact of incremental tariffs AAPL YTD mountain AAPL, which comes as Apple’s performance has lagged behind the stock market’s “Trump strategy” so far this year. guarantee. For example, Tesla surged nearly 15% the day after the election, and its stock price rose nearly 28% in the eight trading days following the vote. Apple has changed little over the same period. The iconic iPhone and iMac maker has also underperformed the rest of the market so far throughout the year. Apple is up nearly 17% this year, while the S&P 500 is up about 23% (not including reinvested dividends). During Trump’s first term, the U.S. struck a trade deal with China that exempted some consumer goods made in China, such as phones and computers, from tariffs, allowing Apple to avoid tariffs on its core products. But assuming Apple does not receive an exemption this time, Morgan Stanley predicts that if a 15% tariff is imposed on imports from China to the United States, the company will lose 5.5% in earnings per share. Wall Street investment banks expect Apple to suffer a 9.2% loss in earnings per share amid a 25% tariff on goods from China. In a Morgan Stanley research note, these estimates made Apple the fifth most vulnerable technology company to tariffs on Chinese goods. “Ultimately, it’s a negative,” CFRA Research analyst Angelo Zino told CNBC. “It’s going to eat into Apple’s earnings in some way, whether it’s by driving sales that may be lower or by absorbing some of the costs that reduce margins.” Still, Zino believes any impact is likely to be relatively small and likely to be offset by the president-elect’s move to put the Justice Department’s lawsuit against the company on hold. “I would say this company has more pricing power than any other company,” Zino continued. “In my view, if tariffs were imposed across the board, the impact on Apple would probably be smaller from a negative perspective than it would be on other companies.” Bank of America analyst Vamsi Mohan agreed, saying any tariffs The impacts are all “controllable”. He believes that a 60% tariff on Chinese goods could cause Apple’s earnings per share to fall by about 4%. That’s if Apple chooses not to raise prices in the U.S. in response to tariffs. The Bank of America analyst said that if Apple chooses to raise prices by 10% to pay for higher tariffs, the impact on profits will be smaller and “negligible.” As a result, he gave the stock a buy rating and a price target of $256, implying an upside of nearly 14% from Friday’s closing price. Others, including Bernstein analyst Toni Sacconaghi, predict Apple’s earnings per share will take a hit of around 7%. By contrast, Dell appears to be “most vulnerable” to tariffs, with earnings per share likely to be hit by as much as about 90%, according to his model. Sacconaghi said that because profit margins are already high, Apple appears to be “less vulnerable than most people think.” He has an overweight rating on the stock and a 12-month price target of $240, suggesting future upside of more than 6% as of Friday’s close. How Apple will respond The Trump administration may also continue to grant exemptions to Apple after the inauguration on January 20. . Last fiscal year, Apple doubled the number of iPhones it produced in India, with a production value of $14 billion. 14% (about one in seven) of the company’s iPhones are produced locally. “If new tariffs are imposed on imports from China, Apple may ask its manufacturing partners to increase production in India and ship to the U.S. from there,” Bank of America’s Mohan told clients in a recent note. The same applies to other Apple products produced in countries other than China, including Vietnam, Malaysia, etc. “Ultimately, Mohan believes that 80% of all Apple products sold in the United States may come from countries other than China. Partly for this reason, Jason Snipe of Odyssey Capital Advisors is sticking with Apple. Tariffs aside, he noted that with the release of the iPhone 17, future iOS updates — especially the incorporation of new Apple Intelligence features — will be the catalyst for another sales “supercycle.” “It’s probably going to be in a trading range for a while,” the chief investment officer told CNBC. “But I do think once the focus shifts and a new administration comes in and all the tariff talks start to calm down a little bit, I think that’s when people will Start saying, ‘Wait a minute, I think apples have legs.'”
