Apple is making changes to protect its post-tariff business

Apple has several plans it is now putting into place to shield its business from the impact of US tariffs on its hardware imports, but consumers must expect some price increases even as suppliers, partners, and Apple itself will also need to bear some pain. The key changes Apple may make that are being most widely discussed follow:

Consensus concerning Apple’s likely strategy with which to handle the huge US tariffs being applied on the goods US consumers need is beginning to emerge. Speculation from Morgan Stanley, Mark Gurman, Ming-Chi Kuo, myself, and other analysts all seems to be coming to the same set of initial conclusions. This is what we think we know about Apple’s immediate and mid-term strategy to survive the tariff-driven existential threat to its business.

It is inevitable that Apple will increase prices

Morgan Stanley estimates these tariffs will amount to over $33 billion in costs per year to Apple. For others, including Dell and HP, the tariffs more or less match the entire estimated income for 2025. “Raising prices is the most viable path forward,” said Morgan Stanley. “Raising prices is the most likely mitigation tool, in our view (all imports now face tariffs, so the playing field has been somewhat levelled), but it’s inflationary and guaranteed to negatively impact demand given the severity of some pricing increase,” wrote analyst, Erik Woodring. Apple may also target price increases at those of its customers more likely to accept them, such as Pro series purchasers.

Stockpiling and redirection

Cushioning the blow, reports are piling in that Apple stockpiled products in advance of the tariffs coming into effect. In this case, it apparently built its product stockpiles up before the event in anticipation of the tariff news, with devices being flown in from India, as well as China, to create some stock in hand.

Redirecting products to more tariff-friendly (i.e., 10%) nations could be a potential mitigation tool, but it would depend on the usable infrastructure available, Morgan Stanley said. “Either way, we believe reciprocal tariffs are a lose/lose for Hardware companies.”

Manufacturing in the US

There are so many reasons why manufacturing won’t return to the US – not only does the nation not have the expertise to manufacture everything it consumes, but it doesn’t have the skilled workers, either – even if most of them are automated machines (made by whom?)

The biggest challenge is cost.

It costs billions to build a factory. Morgan Stanley says: “To put the cost of manufacturing in the US into perspective, it cost Hon Hai (covered by Sharon Shih) over $1.5B, inclusive of perks (lower power costs, subsidies, etc.) and tax breaks to build “iPhone City” in Zhengzhou, China in 2010, which produces ~50% of the world’s iPhones. iPhones represent just 19% of total global smartphone shipments, and smartphones represent just 32% of total hardware spending (per IDC) in 2024, meaning the cost to move hardware assembly to the US would be hundreds of billions of dollars, not even counting the wage disparities between SE Asia and the US.”

Even if companies decide to do more manufacturing in the US, getting to that point will take a generation.

Wedbush Securities analyst Daniel Ives says it would take Apple three years and $30 billion to move just 10% of its supply chain from Asia to the US and doing so would have a big impact on product prices.

“The chances that Apple and the overall tech supply chain moves to the U.S. is a fantasy, fictional tale, unless you like $3,500 iPhones, $2,500 TVs and $300 AirPods,” Ives said.

Manufacturing in lower tariff areas

Attempting to get ahead of these taxes, Apple has shifted c.15%+ of its iPhone production to India and now makes all MacBook’s sold in the US in Vietnam. Both nations face high tariffs, though at a lesser degree to those being imposed on China.

Since news of these tariffs broke we’ve learned that Apple is considering expanding its manufacturing operations in Brazil. The company announced a huge new US factory just weeks ago. “India and Vietnam are far more likely than China to secure US tariff exemptions. Though the timeline is unclear, this would speed up Apple’s shift of assembly orders away from China until non-Chinese production can satisfy most US demand,” wrote Ming-Chi Kuo.

Take the tariff pain itself

Apple has big resources, and all the Apple industry watchers seem to think it may carry some of the cost consequences of these tariffs, rather than raise prices too steeply. That means shaving a few points off of its c.45% margins.

That may be true, but it is doubtful the company will take all the weight of these tariff-driven taxes, which means some, though not all, of its products may experience price volatility in the coming months.

It is probable that Apple will make increases in its global prices, rather than confining these to the US as part of its response – though given that it generates more revenue on each dollar raised on service sales, I wouldn’t be too surprised to see iCloud prices increase before hardware costs increase.

Though if it does plan price increases I’d be inclined to think it will choose to put those in place before it introduces any new iPhones, so as to avoid that device being buried under a deluge or reports concerning price.

Share the pain

Apple will likely lean on component makers and others in the supply chain to prune their own margins, or even adjust their own national tariffs. This may yield less than it hopes for, given the razor thin margins its suppliers already generate from their Apple business. Larger suppliers will be more impacted as a result. Apple may also increase carrier subsidies and reduce the value of trade-in schemes.

Wait and see

Policies can change and it remains to be seen the extent to which industries impacted by these tariffs (which is most of them) will succeed in lobbying for mitigation of these rules.

That, and the fact that political leadership can change over time, means most enterprises will seek to maintain their business into a future chance to change direction.

It is cheaper, after all, to cough up billions in tariffs than to spend tens of billions on new manufacturing facilities.

While neither is a good choice, the wait and see option may feel like the least bad choice.

But it’s a long wait

At the same time, there is no fast path in this – at least, not according to Kuo, who writes, “As of a few hours ago, industry surveys of major U.S. consumer electronics and AI chip-related supply chains show no sign of tariff exemptions.

“I’m no tariff law expert, But if reciprocal tariffs are exempted right now, the line of people involved asking to negotiate with the White House would likely be a lot shorter.

“Does that enhance President Trump’s current bargaining power in negotiations? I’ll let you draw your own conclusions.”

He also warns that the impact of these tariffs will weaken consumer confidence and reduce purchasing power, which will increase Apple’s device replacement cycles.

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