With the Trump administration’s new tariffs—25% on imports from China and 10% from Mexico and Canada—set to hit in May 2025, Apple faces a potential 20% cost spike for iPhones, which could disrupt its $200 billion smartphone business. Here’s how the company might keep prices stable:
- Shift Production Out of China: Apple’s already moving assembly to India (14% of iPhones now, aiming for 25% by 2027) and expanding in Vietnam and Thailand for components. These tariff-free regions could absorb more production, dodging duties on Chinese-made goods.
- Eat the Costs: With 46% gross margins and a $97 billion cash reserve, Apple could swallow some tariff hits. The iPhone 16 Pro’s $570 production cost leaves wiggle room at its $999 price tag, though profits might take a $5 billion dip in 2026.
- Squeeze Suppliers: Apple’s supply chain clout lets it push partners like TSMC or Foxconn to cap price hikes. It’s also negotiating subsidies in China, leveraging its $60 billion economic footprint there to offset tariff costs.
- Boost U.S. Production: While full iPhone assembly stateside is pricey, Apple could ramp up component manufacturing—like chips at its planned Arizona TSMC plant—using CHIPS Act grants to skirt import duties.
- Tweak Other Revenue Streams: Apple might raise prices on MacBooks, iPads, or services like Apple Music ($29 billion last quarter) globally to subsidize U.S. iPhone prices, preserving its 56% market share.
Apple’s in talks with D.C., with Tim Cook pitching incentives to ease the tariff sting. By blending these strategies, it could shield consumers from price hikes—keeping iPhones competitive against Samsung and Google—while navigating the trade storm.