Kuo: Apple Likely to Absorb Any US Tariff Cost Increases on iPhone, iPad, and Mac

Apple's domestic pricing and shipment forecasts aren't likely to be impacted by U.S. tariffs thanks to "proper preparations" made by the tech giant, according to a new investor note by Apple analyst Ming-Chi Kuo and obtained by MacRumors.


Financial markets were rattled last week by President Donald Trump's surprise announcement of 10 percent tariffs on $300 billion of Chinese imports, effective September 1, in retaliation for moves by the Chinese government.

It's still unclear if Apple's products will come under the tariffs on toys, games, and consumer electronics, but if they do, Kuo believes Apple will absorb most of the additional costs in the mid-short term while increasing its non-Chinese production locations to avoid rising costs in the long run.
In the mid-short term, if Apple absorbs most of the additional costs due to tariffs, there will be a negative impact on its profits from its hardware business, but the company will reap benefits in its brand image and relationships with suppliers. We also believe that the negative impact on Apple are limited and temporary because the profit from service business is growing, and non-Chinese production locations will gradually increase.
Apple has been expanding production in India and Vietnam as part of a strategy to diversify product manufacturing beyond China. Kuo thinks Apple's non-Chinese production locations could meet most of the demand from the U.S. market after two years. Specifically he believes iPhone, iPad, and Apple Watch manufacturing could meet demand as early as next year, but adequate Mac production outside of China won't be achieved before 2021.

The predictions stand in contrast to recent comments made by Apple CEO Tim Cook during his July earnings call, in which he was asked about Apple potentially moving out of China. Cook responded: "There's been a lot of speculation about this, [but] I wouldn't put much stock in it. Parts come from everywhere, including the U.S. We currently make the Mac Pro in the US and would like to continue that."

Earlier last month, Apple asked for a U.S. import tariff exemption on parts for the new ‌Mac Pro‌, which President Trump said would be denied.

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Top Rated Comments

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19 weeks ago
Cause they know that people won't accept higher prices on the iPhone anymore
Rating: 31 Votes
19 weeks ago
What everyone here seems to forget is the disproportionate amount in trade with a China. They steal our IP regularly, no one polices them as heavily as they should, and all in the name of cheaper labor.

For everyone blaming Trump, grow up and stop being a band wagoner. Since when has more government and any government been a good thing or been done correctly?

The FCC finally pushing to stop these robo callers took how long? And why?.... only because it impacts them is why.

For the first time someone in the Oval Office in a long Time is there who doesn’t need the pay check. Yes he may do things for Corp America, but show me a few company’s who’s CEOs who aren’t about ever increasing their revenue and income?

Government used to be viewed as a role to serve the country. Now it’s a self serve and everyone goes along in blaming one person when it’s certainly not.
Rating: 22 Votes
19 weeks ago

Cause they know that people won't accept higher prices on the iPhone anymore


Well yes this is true.
It puts Apple in a bit of a jive, sure they've got the pockets to do this but they shouldn't really have to.
Trump needs to go already.
Rating: 19 Votes
19 weeks ago
Bull. There's no way I'd eat a tariff if everyone knows who's the cause. This isn't some minor, slip it in a bill from Congress. This is Trump doing Trump. Tim is going to go nearly the full +10, and he's going to point at Don the Con.
Rating: 18 Votes
19 weeks ago

What everyone here seems to forget is the disproportionate amount in trade with a China. They steal our IP regularly, no one polices them as heavily as they should, and all in the name of cheaper labor.

For everyone blaming Trump, grow up and stop being a band wagoner. Since when has more government and any government been a good thing or been done correctly?

The FCC finally pushing to stop these robo callers took how long? And why?.... only because it impacts them is why.

For the first time someone in the Oval Office in a long Time is there who doesn’t need the pay check. Yes he may do things for Corp America, but show me a few company’s who’s CEOs who aren’t about ever increasing their revenue and income?

Government used to be viewed as a role to serve the country. Now it’s a self serve and everyone goes along in blaming one person when it’s certainly not.

people's hatre for trump is blinding their common senese... what else is new?
Rating: 18 Votes
19 weeks ago
Too bad farmers don’t have the same insulation from tariffs.
Rating: 15 Votes
19 weeks ago

Bull. There's no way I'd eat a tariff if everyone knows who's the cause. This isn't some minor, slip it in a bill from Congress. This is Trump doing Trump. Tim is going to go nearly the full +10, and he's going to point at Don the Con.


Is it unreasonable to at least request parity in regards to tariffs? Read Musk’s comments on the exorbitant regulations for US car manufacturers in China.
Rating: 13 Votes
19 weeks ago
what if Apple knew this all along and increased the prices of iPhones ahead of time so that customer will think Apple is doing their favor?? *mind-blown*
Rating: 11 Votes
19 weeks ago

China labor isn't so cheap anymore yet they're still one of the leading manufacturers in the world. Perhaps we should work on ideas on how to better compete than on how to change the rules of a game we're losing.



Our government had a very good plan for challenging China's dominance - it was called TPP ('https://en.wikipedia.org/wiki/Trans-Pacific_Partnership'), which Trump summarily discarded.


America is so focused on "you must have a degree" and no one uses it to its potential and trades we have previously held are all being outsourced to other countries. The idea of bringing labor jobs back home isn't a bad one. And sending Apple products to be manufactured in other countries may sacrifice on quality. But make no mistake, Apple will still charge the lofty premium that Tim Apple likes to charge.

I hope the Mac Pro stays in the US, and hope that other devices come back too. This country needs to get back to its roots and stop outsourcing.

Case and point, I bought an Eero Mesh system. Do you know how great it is to speak quickly to someone stateside who isn't reading from a script and actually knows what they are talking about?! Might seem trivial, but how many of us get irritated when we call a company and get the run around or someone who doesn't understand fully the problem?

I'm all for supporting and bringing things back home. It's time we take care of ourselves as a nation and not the world.
Rating: 10 Votes
19 weeks ago
There is clearly room in the profit margins Apple has in place to do. Will they though, that is another matter.
Rating: 8 Votes

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