iPhone buyers worldwide may see higher prices because of Trump's tariffs

AppleInsider

Every iPhone buyer in the world may get hit with the side-effects of President Donald Trump's tariffs, as Apple may choose to hike prices everywhere to keep profit margins up.

Morgan Stanley says the iPhone 16 Pro would cost 35% more if it were made in the US -- assuming it even could be

The new 25% tariff may only have been imposed on Apple as retribution for Tim Cook declining a Trump invitation, but it's going to come into effect well ahead of the iPhone 17 launch. Just as AppleInsider did when the tariff was announced, Morgan Stanley has concluded that it's in Apple's best interests to pay the tariff rather than try to move manufacturing back to the US.

In a note to investors seen by AppleInsider, the investment firm does suggest that there could come a level of tariffs where Apple is forced to reshore to the US. That level, its analysts say, may be the 145% that Trump previously imposed on China.

But at the current rate, Morgan Stanley estimates that Apple could raise iPhone prices by 4% to 6% worldwide in order to offset Trump's US import fee. That raised profit margin outside the US would balance the lower profit margin for iPhones sold in the States.

That figure doesn't seem to take into account the effect of price rises on demand for the iPhone. Nor how in the US, all consumers and all businesses are facing the cost of tariffs, so demand for all items is under threat.

Assuming that the iPhone is a closed system, unaffected by other economic pressures on buyers, Morgan Stanley says that the opposite of global price increases is moving production to the US.

However, its analysts calculate that, for one example, an iPhone 16 Pro made in the US would be 35% more expensive. That is taking into account the hugely greater labor costs in the US compared to overseas, plus how tariffs would still be imposed on key materials and components.

Then Morgan Stanley notes that it has taken TSMC four years for its Arizona chip fab plant to be fully operational. It concludes therefore, that the first US-made iPhone couldn't be produced until after Trump leaves office.

Even all of this presupposes, though, that it is physically possible for the iPhone to be made in the US. In reality, there is not the skilled labor market needed, and there is not the infrastructure to make it happen.

Morgan Stanley also notes, though it does not explain, that moving manufacturing to the US would incur what it describes as second-order ramifications for Apple. It's likely, though, that this would include the cost of breaking existing contracts with foreign countries.

Then, too, countries such as Indonesia require a certain percentage of device components to be produced locally -- or they ban sales of the iPhone.

What Apple could do instead

Morgan Stanley does suggest that Apple may have options beyond paying the tariff or reshoring to the US. Apple could -- and its analysts say it should -- announce moving certain other devices to the US.

Specifically, AirTags, the HomePod, and perhaps the Mac, could be announced alongside a commitment to future reshoring of other devices.

The analysts see that as giving Trump a win, and so giving Apple a respite from further tariffs.

Nonetheless, Morgan Stanley concludes that tariff costs are likely to increase beyond the $900 million Apple estimated for the next quarter. Even so, it retains its price target of $235.



Read on AppleInsider

anthogag

The Trump circus is probably more concerned about the US being at the leading edge of technology. Apple should make its most sophisticated and advanced components in the US. This would probably solve everything.

prof

Hiking internal prices (which are already higher than in the US) to make up for the margin losses in the US will put a massive damper on those non-US markets. Of course Apple knows this and will do what is best for them. However I'm really surprised that Morgan Stanley is farsighted enough to suggest such a dumb move...

ijeffrey

I would rather pay the tariff on my iPhone as long as it’s made someplace else. This country knows how to build cars, not smartphones.

pianoman1962

This is what happens when a baby who spits his dummy out when he doesn't get his own way is elected. That megalomaniac isn't fit to lead a Boy Scout group, let alone the USA. I wonder if Americans are regretting their choice at the polling booths yet?

massiveattack

To be fair: We saw price hikes coming even after iPhone 16e. 

But Apple may hike prices higher than planned due to tariffs. 

I think Galaxy users are negatively affected by tariffs because many users use them due to more affordable prices. 

cpsro

Just like freedom, privacy isn't cheap, when everyone else looks to make you the product or the slave.

grannysmith99

iJeffrey said:

I would rather pay the tariff on my iPhone as long as it’s made someplace else. This country knows how to build cars, not smartphones.

"This country" being the USA? You have to be joking! Germany, Italy, Japan,  and even the UK know how to build cars. The US just builds oversize, gas guzzling, mostly ugly, overweight hunks of steel that can't go around corners! 

gadgetcanadav2

I don’t live in the US. If Apple wants to spread the tariff costs to all other non-US countries, I’ll skip any Apple purchases for at least the next 4 years until the orange orangutang is gone

badmonk

Actually the absurdity of this is that the final assembly of an iPhone has little value.  I have read analyses that put this at much less than 10% (maybe as low as 5%) of the final value of the phone.  Most of the value of the phone are in the components that can only be sourced by a very few manufacturers, usually located in Asia (it’s called high tech manufacturing for a reason).  iPhone assembly is not going to be a middle class single wage earner job (unless you want to engage in a soviet-style jobs program). And note these phones will not be able to be sold outside the USA because they will be too expensive, so again it will be an expensive jobs program.

The question is whether Americans want to do this work in enough numbers and whether this investment makes sense.  Apple makes 600 thousand phones a day and they are made largely by hand.  Not to mention around a 1/3 of equipment needed to make a factory will need to be imported and hence subjected to tariffs.  Not to mention the personnel needed to get a factory up and running will need to be imported.  The Trump administration is too ideologically blinded to make this happen in a cost effective intelligent fashion.

Tariffing Apple is a tax on an American company that will lead to higher prices, lay-offs and make our country poorer.  And repeat the same for every American company taxed as a result.  Shooting the legs off the American economy is not going to lower our debt.  Honestly, congress should take the power of tariffs out of Trump’s hands.  Or impeach him.

And the fact that the source of the tariff was not some intellectual stance but because Tim Cook didn’t go to the middle east for a circle jerk is galling.

edited May 27

hammeroftruth

anthogag said:

The Trump circus is probably more concerned about the US being at the leading edge of technology. Apple should make its most sophisticated and advanced components in the US. This would probably solve everything.

Fantasy Land in Disneyland has some space.  

hammeroftruth

badmonk said:

Actually the absurdity of this is that the final assembly of an iPhone has little value.  I have read analyses that put this at much less than 10% (maybe as low as 5%) of the final value of the phone.  Most of the value of the phone are in the components that can only be sourced by a very few manufacturers, usually located in Asia (it’s called high tech manufacturing for a reason).  iPhone assembly is not going to be a middle class single wage earner job (unless you want to engage in a soviet-style jobs program). And note these phones will not be able to be sold outside the USA because they will be too expensive, so again it will be an expensive jobs program.

The question is whether Americans want to do this work in enough numbers and whether this investment makes sense.  Apple makes 600 thousand phones a day and they are made largely by hand.  Not to mention around a 1/3 of equipment needed to make a factory will need to be imported and hence subjected to tariffs.  Not to mention the personnel needed to get a factory up and running will need to be imported.  The Trump administration is too ideologically blinded to make this happen in a cost effective intelligent fashion.

Tariffing Apple is a tax on an American company that will lead to higher prices, lay-offs and make our country poorer.  And repeat the same for every American company taxed as a result.  Shooting the legs off the American economy is not going to lower our debt.  Honestly, congress should take the power of tariffs out of Trump’s hands.  Or impeach him.

And the fact that the source of the tariff was not some intellectual stance but because Tim Cook didn’t go to the middle east for a circle jerk is galling.

We are in trouble because Congress is dumber than our president. They will gladly ride his bus off a cliff. 

nubus

With USD having dropped 10% under Trump and Apple buying in USD (and Apple HQ being all USD) but selling mostly in other currencies the margin could get a 6-7% boost for a 12-14% improvement in profits. Apple should simply keep pricing and let margins from exports pay the bills from tariffs.

At some point contracts will be renewed but if Trump can push the dollar further down by doing a "big unfunded bill" then Apple will do just fine.

9secondkox2

Will be interesting to see the fruit of continued talks between cook and the president. 

Tarriffs are no fun. But necessary to restore the balance of power in global trade. 

The president has tried to help apple through this as much as possible. Bow it’s Cook’s turn to do his part. Hopefully this lights a fire under him to get after it. 

davgreg

GrannySmith99 said:

"This country" being the USA? You have to be joking! Germany, Italy, Japan,  and even the UK know how to build cars. The US just builds oversize, gas guzzling, mostly ugly, overweight hunks of steel that can't go around corners!  

Mercedes builds in Alabama, BMW in South Carolina- including export to the EU, Volvo in South Carolina, Volkswagen in Tennessee, Subaru in Indiana, Honda in Ohio, Nissan in Tennessee and Mississippi, Mazda in Alabama, Toyota in Texas, Kentucky and Mississippi.

The EU car assembly business is in a death spiral of bad quality and high labor costs.

edited May 27

davgreg

Google Pixels are made in China and Vietnam
Samsungs are made in Vietnam

When all of this settles out, the relative rates of tariffs will have a big say in all of this.

applezulu

9secondkox2 said:

Will be interesting to see the fruit of continued talks between cook and the president. 

Tarriffs are no fun. But necessary to restore the balance of power in global trade. 

The president has tried to help apple through this as much as possible. Bow it’s Cook’s turn to do his part. Hopefully this lights a fire under him to get after it. 

As one of the few who imagines that Trump "has a plan" behind all the tariff bluster, I'm going to ask you again. Trump has given Apple four weeks to build and open an iPhone factory in the United States, or face a 25% tariff on all iPhone imports. Since that is impossible to do, what is it you think Tim Cook should say to "do his part?" 

cujoyyc

Those of us living outside of the US didn't elect Mango Mussolini. We're already paying a high price for the economic destruction wrought by the petulant grifter currently in the Whitehouse. Don't make us pay even more than we already are. Those who voted for the clown really need to pay the price for their wilful ignorance;

mattinoz

badmonk said:

Actually the absurdity of this is that the final assembly of an iPhone has little value.  I have read analyses that put this at much less than 10% (maybe as low as 5%) of the final value of the phone.  Most of the value of the phone are in the components that can only be sourced by a very few manufacturers, usually located in Asia (it’s called high tech manufacturing for a reason).  iPhone assembly is not going to be a middle class single wage earner job (unless you want to engage in a soviet-style jobs program). And note these phones will not be able to be sold outside the USA because they will be too expensive, so again it will be an expensive jobs program.

The question is whether Americans want to do this work in enough numbers and whether this investment makes sense.  Apple makes 600 thousand phones a day and they are made largely by hand.  Not to mention around a 1/3 of equipment needed to make a factory will need to be imported and hence subjected to tariffs.  Not to mention the personnel needed to get a factory up and running will need to be imported.  The Trump administration is too ideologically blinded to make this happen in a cost effective intelligent fashion.

Tariffing Apple is a tax on an American company that will lead to higher prices, lay-offs and make our country poorer.  And repeat the same for every American company taxed as a result.  Shooting the legs off the American economy is not going to lower our debt.  Honestly, congress should take the power of tariffs out of Trump’s hands.  Or impeach him.

And the fact that the source of the tariff was not some intellectual stance but because Tim Cook didn’t go to the middle east for a circle jerk is galling.

Most of the purchase price is the IP in the from of chip licensing, software licensing and branding. Much of that is moving where it needs to around the world via Ireland and other locations. 

Apple can shield their global pricing by using the euro dollar as their secondary default currency then move the USD price up more without saying it is due to tariffs. Even though it will be easy to work out.  

Apple doesn’t want to expose the global currency grift America has inflicted on the world for decades (and now abandoned overnight) to overtly..

which would be why said bank might be pushing this line in the first place.

pulseimages

iJeffrey said:

I would rather pay the tariff on my iPhone as long as it’s made someplace else. This country knows how to build cars, not smartphones.

The USA knows how to build cars? You’re kidding right? There’s a reason the US Government had to bail out GM and Chrysler, because they build unreliable junk! 

mikeinca

anthogag said:

The Trump circus is probably more concerned about the US being at the leading edge of technology. Apple should make its most sophisticated and advanced components in the US. This would probably solve everything.

No, trump doesn’t care about anything, including tech, except how much money he’s getting.  He’s killing education from kindergarten thru graduate school.  He’s killing science.   Engineering.   He has no care about anything except what he can get from bullying people.  And he’s only got a 8-year-old’s understanding of things and can’t see how  being at the leading edge of science and tech makes us more rich and powerful.  It’s all about what he can get NOW.