The Apple stock (AAPL) has dropped nearly 5% after the Trump administration announced it would implement tariffs of 104% on goods imported from China. AAPL was already falling after the initial 54% in tariffs from the Trump administration. This is due to the additional 34% tariff that was imposed on the existing 20% tariff on Chinese goods. AAPL was initially as high as $190.34 after it opened at $186.73. However, investors began to drop out after the new tariffs were announced by the administration.
Margin Projections of AAPL
Baird Equity Research analyst William Power was predicting Apple’s gross margins to drop 6.8% to 44.4% in 2025 and to 41.6% in 2026 under Trump’s plan for tariffs during his presidency. The additional tariff will now have a greater impact. It is unclear how the company will deal with the increase, as it was exempt from tariffs during Trump’s prior term, but there is no guarantee that it will be exempt this term as well.
China’s Response
AAPL went down by 7.3% after China announced its tariffs in retaliation. However, Trump responded to this by threatening additional tariffs that the United States would impose on Chinese goods. More specifically, Trump announced that he would threaten to impose an additional 50% on Chinese goods if China did not drop its additional 34% on American goods.
Apple’s Revenue And Production
Most of Apple’s revenue comes from iPhone sales in the United States of America, so investors are factoring these higher smartphone prices into the share price. Apple relies on its manufacturing chain, which is located in China, to produce its smartphones. There have been reports suggesting that Apple is interested in expanding production in both Brazil and India due to the lower tariffs from the Trump administration in those countries.
Apple’s other best-selling devices are manufactured internationally, which makes the company subject to increasing costs due to tariffs imposed by the Trump administration. Worst case, Apple’s earnings will potentially decline by 30%. However, Apple has ways to combat these rising costs, such as through price adjustments, stronger carrier collaborations, relocating production, and expanding its high-margin services segment.
The United States of America contributes roughly 25-30% of Apple’s total revenue. Services revenue is not impacted by tariffs. After excluding this, approximately 20-25% of Apple’s overall revenue may face significant margin pressure. Other operating costs will not drop with the decreasing gross profits, so the overall effect on both net income and earnings per share may be even bigger.
