US President Donald Trump announced new tariffs for goods imported from other parts of the world. A 10% "baseline" will apply to all countries, and higher reciprocal tariffs will apply to individual countries. Apple is among the big companies affected, and its stock price fell by around 9% after the announcement.
In recent years, the Cupertino giant has started diversifying its production bases outside China, with India and Vietnam among the new locations. All of these regions house around 85-90% of Apple's hardware assembly; however, the new policies impose tariffs of 54% (China), 26% (India), and 46% (Vietnam), respectively.
The new tariffs will contribute to a significant rise in costs for hardware exports to the US, according to Apple supply chain analyst Ming-Chi Kuo, who noted that Apple's gross margin could drop by about 8.5-9% if it keeps prices unchanged.
In a social media post, Kuo shared five ways Apple could reduce the impacts of the new tariff policies. The analyst expects Apple to shift about 15% of its global iPhone production to India by 2025, up from 10-12% in 2024. The company can limit its gross margin drop to 5.5-6% if India and Vietnam secure tariff exemptions through new trade agreements.
Coupled with potential tax exemptions, if Apple can increase its iPhone production capacity in India to 30% of the global supply, the "negative impact on gross margins could shrink dramatically to just 1-3%," according to Kuo.
The analyst noted that high-end "Pro" iPhones account for 65-70% of new model sales in the US market. Apple can reduce negative impacts by charging more, as "high-end consumers are relatively more accepting of price increases."
The company can also take other steps, such as increasing carrier subsidies, putting more pressure on suppliers to cut costs, or reducing Trade-In program discounts. This can offset tariff costs while "softening the perception of price hikes," Kuo said.
The gross margin is expressed as a percentage and measures how much money Apple earns on a product after removing the cost of making it. In its 2025 first quarter results, Apple reported a high gross margin of 46.9%. Kuo said that even if Apple's gross margin falls below 40% due to the tariffs, it should be short-lived.
Apple announced a massive 500 billion dollar investment in the US earlier this year. It plans to create 20,000 jobs over the next four years and set up an AI server manufacturing facility in Texas. However, it was reported that Apple also demanded a slew of benefits from the Trump administration.
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