United States President Donald Trump met with Apple CEO Tim Cook recently to discuss the potential impact tariffs would have on the U.S. tech giant. Based on unconfirmed reports, President Trump may be leaning toward providing the tech company with some kind of exemption from the import tax.
Those new 10 percent tariffs on various Chinese made goods imported to the U.S. could hit Apple at a time when smartphone sales continue to flatten and just as the company’s accessories, Mac and iPads, are on the rise. If those tariffs do go into effect, Apple could take a hit to its margins, or, in a less likely scenario, pass the added cost onto consumers.
Apple is looking at the possibility of being impacted by the 10 percent tariff, regardless of when it goes into effect. A few weeks ago, President Trump delayed tariffs on some consumer goods. But the tariffs scheduled to go into effect on September 1 would hit products including the company's smash hit accessories, including AirPods and Apple Watch.
In mid-December Apple's iPhones, laptops, desktops and iPads will be hit with the same 10 percent tax that landed on AirPods and Apple Watches just a few months earlier. That's a significant chunk of the company's business.
If Apple ends up passing the price of those tariffs onto consumers, the cost of products would increase by 10 percent. For something like the AirPods with wireless charging pod, which start at US$ 199, the cost would increase by US$ 19.90, bringing the price to US$ 218.90.
The Apple Watch Series 4 40mm model, which starts at US$ 399, the 10 percent tariff would add US$ 39.90 to its cost, pushing its price up to US$ 438.90. The US$ 399 44mm model Apple Watch Series 4 would jump by US$ 42.90, increasing the price to US$ 471.90.
So, will Apple pass the cost of tariffs on to consumers? According to UBS analyst Timothy Arcuri, it's unlikely. In an analyst note, Arcuri explained, "Apple would likely absorb the initial 10 percent tariff increase putting pressure on margin, though FX could be slight offset."
Gartner vice president and research analyst Annette Zimmermann agrees with that assessment saying that Apple will likely take on the 10 percent tariff itself. But anything higher could be passed to consumers at some point.
"Of course, we don't know for certain what Apple is going to do—the 10 percent tax that is coming now in September for its wearables and Home Pod might get absorbed by Apple and not passed on to the consumer," she explained via email.
"However, there are scenarios where a 25 percent tax is discussed coming in December—in that case it is more likely that Apple passes on the taxes at least partially to consumers," Zimmermann added.
Those new 10 percent tariffs on various Chinese made goods imported to the U.S. could hit Apple at a time when smartphone sales continue to flatten and just as the company’s accessories, Mac and iPads, are on the rise. If those tariffs do go into effect, Apple could take a hit to its margins, or, in a less likely scenario, pass the added cost onto consumers.
Apple is looking at the possibility of being impacted by the 10 percent tariff, regardless of when it goes into effect. A few weeks ago, President Trump delayed tariffs on some consumer goods. But the tariffs scheduled to go into effect on September 1 would hit products including the company's smash hit accessories, including AirPods and Apple Watch.
In mid-December Apple's iPhones, laptops, desktops and iPads will be hit with the same 10 percent tax that landed on AirPods and Apple Watches just a few months earlier. That's a significant chunk of the company's business.
If Apple ends up passing the price of those tariffs onto consumers, the cost of products would increase by 10 percent. For something like the AirPods with wireless charging pod, which start at US$ 199, the cost would increase by US$ 19.90, bringing the price to US$ 218.90.
The Apple Watch Series 4 40mm model, which starts at US$ 399, the 10 percent tariff would add US$ 39.90 to its cost, pushing its price up to US$ 438.90. The US$ 399 44mm model Apple Watch Series 4 would jump by US$ 42.90, increasing the price to US$ 471.90.
So, will Apple pass the cost of tariffs on to consumers? According to UBS analyst Timothy Arcuri, it's unlikely. In an analyst note, Arcuri explained, "Apple would likely absorb the initial 10 percent tariff increase putting pressure on margin, though FX could be slight offset."
Gartner vice president and research analyst Annette Zimmermann agrees with that assessment saying that Apple will likely take on the 10 percent tariff itself. But anything higher could be passed to consumers at some point.
"Of course, we don't know for certain what Apple is going to do—the 10 percent tax that is coming now in September for its wearables and Home Pod might get absorbed by Apple and not passed on to the consumer," she explained via email.
"However, there are scenarios where a 25 percent tax is discussed coming in December—in that case it is more likely that Apple passes on the taxes at least partially to consumers," Zimmermann added.
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