Nearly Rs 2 lakh for iPhone? Why Trump’s tariffs could make Apple’s products costlier

United States President Donald Trump’s tariffs have spared no one. One of the worst hit by his new tariff plan was Apple whose shares plunged more than 9 per cent on Thursday (April 3).

The American tech giant reportedly lost $300 billion in market value following Trump’s announcement on Wednesday. The US has imposed new tariff rates on over 180 countries, including those that are major manufacturing hubs for Apple.

As tariffs put pressure on the iPhone maker, will your favourite phones become costlier?

Let’s take a closer look.

How Trump’s tariffs affect Apple

US President Donald Trump has announced “reciprocal tariffs” on Apple’s biggest production and supplier hubs in Asia, including China, India, and Vietnam.

More from Explainers

Apple to ship more iPhones from India as Trump's China tariffs cause worst 3-day rout in 25 years Trump’s tariffs just hit Apple hard: Can India still become the next iPhone factory?

China, which is the hardest hit with a 54 per cent tariff, makes about 90 per cent of the about 200 million (20 crore) iPhones that Apple sells around the world every year, reported New York Times (NYT).

According to estimates from Evercore ISI, China accounts for Apple’s 80 per cent manufacturing capacity. It projects that 55 per cent of Apple’s Mac products and 80 per cent of iPads are assembled in the Asian country, reported CNBC.

In recent years, Apple has diversified its supply chain beyond China to countries like India and Vietnam. Both are facing high import taxes – 26 per cent and 46 per cent, respectively.

Editor’s Picks

1

Explained: The many legal cases taking a bite out of Apple 2

Why is Apple offering hefty discounts for iPhones in China?

Commerce & Industry Minister Piyush Goyal had said in 2023 that Apple is aiming to manufacture 25 per cent of all of its iPhones in India.

As per CNBC, Bernstein analysts estimate Apple could be producing 15-20 per cent of all iPhones in India by the end of 2025.

Apple has also increased its production in Vietnam in recent years. Around 20 per cent of iPad manufacturing and 90 per cent of the assembly of Apple’s wearable products like the Apple Watch happens in Vietnam, says Evercore ISI.

Will iPhone’s prices skyrocket?

With Trump imposing high tariffs on Apple’s key manufacturing hubs, the iPhone maker is starting to feel the heat. According to Financial Times, the high import duties will impact every model of iPhone, iPad, Mac and other items sold by Apple.

The US tech giant has a tough choice now: it can either bear the additional costs itself or charge it from consumers.

As per The Guardian, Ben Barringer, global technology analyst at Quilter Cheviot, said, “Apple makes 90 per cent of its products in China, with 10 per cent in other Asian countries such as Vietnam and India. These countries are facing the harshest tariffs, so we can expect iPhones and Apple Watches to go up in price, while hitting the profits of the company significantly. Switching production to the US is neither easy, nor cheap.”

If Apple passes the extra expenses to consumers, its products like iPhones could see hikes of 30-40 per cent, as per a Reuters report. Counterpoint Research co-founder Neil Shah says Apple would have to increase the prices of its products by at least 30 per cent on average to counteract import duties.

Analysts at Rosenblatt Securities predict that rates of iPhones could rise by 43 per cent. For iPhone 16, which costs $799 (about Rs 68,000) in the US, consumers may have to pay $1,142 (Rs 97,200).

The price of the expensive iPhone 16 Pro Max, which currently costs $1599 (Rs 136,100), could jump to nearly $2300 (Rs 195,766).

After a 43 per cent price hike, the cheaper iPhone 16e could retail at $856 (Rs 73,000). It is presently priced at $599 (Rs 51,000).

However, consumers may not have to worry too much, at least right now. Angelo Zino, equity analyst at CFRA Research, told Reuters that it would be difficult for Apple to transfer more than 5-10 per cent of the added cost to consumers.

“We expect Apple to hold off on any major increases on phones until this fall when its iPhone 17 is set to launch, as it is typically how it handles planned price hikes.”

Can Apple save itself from tariff impact?

When Trump imposed high taxes on Chinese imports during his first term at the White House, Apple was able to secure exemptions on several of its products.

The sale of iPhones, iPads and Apple Watches accounts for three-quarters of Apple’s roughly $400 billion in annual revenue, reported NYT.

In February, the iPhone maker promised to invest $500 billion in the US, including opening a new facility manufacturing servers for artificial intelligence (AI) in Texas.

However, so far, the White House has not granted any exemption to the tech giant from the new tariffs. Apple would be hoping to change that.

NYT reported citing Morgan Stanley that Apple is staring at $8.5 billion in increased costs annually from import taxes on iPhones and other devices from China.

If Apple pays the increased costs itself, it will reduce its revenue. Increasing the price of its products could also backfire as the US company would risk affecting demand.

As per BBC, the global investment bank Citi said: “If Apple cannot get exempted this time and assuming Apple gets hit by the accumulative 54 per cent China tariffs and does not pass it through, we estimate about 9 per cent negative impact to the company’s total gross margin.”

Jefferies analysts say Apple could face a 14 per cent fall in its net profit this year unless it hiked its prices to offset the fees, reported Financial Times. They said in a note on Thursday, “Even if Apple is exempted from the current tariffs, it will need to accelerate its supply chain diversification efforts, and thus needs to pay its suppliers better.”

With inputs from agencies