How Apple could mitigate impact of Trump's tariff hikes
What's the story
Apple's stock value plummeted nearly 10% last week, after US President Donald Trump announced a comprehensive tariff plan on all partner trading nations.
The development poses major challenges for Apple, whose supply chain heavily relies on international manufacturing.
Bloomberg's Mark Gurman has now suggested a few strategies that the tech giant could adopt to counter these tariffs and keep its product pricing structure intact.
Pricing challenge
Apple's pricing strategy at risk due to tariffs
Since the iPhone X's launch in 2017, Apple has maintained the base price of its premium smartphone line at $999. However, Trump's proposed tariffs threaten that stability.
The proposed tariffs include a 54% tax on imports from China, 26% on those from India, and 46% on goods from Vietnam, among others.
These steep increases could compel Apple to raise the prices of its products.
Possible solutions
Strategies for mitigating tariff impact
To mitigate the effect of these tariffs, Gurman suggests a few ways Apple could go.
The company could negotiate with component suppliers and manufacturers to get better prices, thus lowering its manufacturing costs.
Another option would be to absorb some costs itself, considering its huge average profit margin of around 45%.
It could also make short-term price adjustments while Apple evaluates the situation and continues diversifying its supply chain.
Inventory management
Apple's inventory strategy and potential price adjustments
In anticipation of the upcoming tariffs, Apple has reportedly been hoarding products.
By bringing in goods in bulk ahead of the tariff implementation dates, Apple can keep its product prices stable for a while.
Gurman notes that while Apple isn't against raising prices, it will try to keep the impact of these tariffs as minimal as possible.
Tim Cook, Apple's CEO, could also push for an exemption from these tariffs. He managed something similar during Trump's first term as President.
Global impact
Potential price hikes in India due to US tariffs
The new tariffs could result in major price hikes for iPhones in India.
If Apple decides to pass on these additional costs to consumers, we could see a 30-40% increase in prices. For example, an iPhone 16 with a base price of $799 could go up to around $1,142.
With India's own taxes and import duties, the final cost of high-end Pro models with 1TB storage may cross ₹2 lakh.
Manufacturing diversification
Apple's expansion plans in Brazil amid trade tensions
Amid rising trade tensions, Apple is said to be looking at a major expansion of its iPhone assembly operations in Brazil.
The move comes as the US government imposes new tariffs on imports from China and India - both critical for Apple's current manufacturing and assembly.
Brazilian publication Exame reports that Apple is considering ramping up production at its Sao Paulo facility, run in partnership with Taiwanese manufacturer Foxconn.