Donald Trump has threatened tech-giant Apple with a 25% tariff if it does not shift iPhone manufacturing to the USA. The US President made the announcement in a post on Truth Social. In his post, Trump said that he had informed Apple CEO Tim Cook long ago that he expected iPhones sold in the USA to be manufactured domestically.
There is significant chatter on social media regarding the potential impact of the tariff threat against Apple. Indians see the announcement as further confirmation of the US President’s tilt away from India in recent days.
Will Apple cut down its investment plan in India due to 25% tariff?
CNBC TV-18 quoted unnamed sources to report that Trump’s 25% tariff threat is unlikely to have any material impact on iPhone manufacturing in India. It was reported on Thursday that Foxconn has invested another $1.5 billion in India to expand its footprint outside of China. Foxconn is the contract manufacturing giant that manufactures iPhones, iPads and Macbooks for Apple.
A cursory glance at the economics of iPhone manufacturing explains why it will be extremely difficult, if not possible, to shift iPhone production to USA. According to an analysis by the Bank of America (BoA), shifting only the final assembly of the iPhone 16 Pro Max to the USA would inflate its cost by as much as 25% based on labour costs alone. It means that the iPhone version which costs the American consumer $1199 currently will cost him $1500 at the bare minimum.
The BoA further stated that “while it may be possible to move final assembly to the U.S., moving the entire iPhone supply chain would be a much bigger undertaking and would likely take many years, if even possible.”
Wedbush Securities Analyst Dan Ives said in a note after Donald Trump announced his Global Tariffs for the first time, “The reality is it would take 3 years and $30 billion dollars in our estimation to move even 10% of its supply chain from Asia to the U.S. with major disruption in the process.”
Dan Ives went further and concluded that “For U.S. consumers the reality of a $1,000 iPhone being one of the best made consumer products on the planet would disappear.” He went on to add, “It speaks to our point that if consumers want a $3,500 iPhone we should make them in New Jersey or Texas or another state… The concept of making iPhones in the U.S. is a non-starter in our view at $1,000. Price points would move up so dramatically it’s hard to comprehend and the near-term margin impact on Apple’s gross margins during this tariff war could be mind boggling for this U.S. tech stalwart.”
The Global Tariffs has since then been put on hold by the Trump Administration after the value of the dollar bond yields began to increase, indicating investors’ distrust of the dollar as a safe investment bet.
Indian iPhone manufacturing is unlikely to be affected
For the above-stated reasons, it is unlikely that iPhone production in India will suffer due to the tariff threat. Moreover, one of the main reasons why Trump backed down from his Global Tariffs announcement is that every survey indicates his Tariff Policies are hugely unpopular.
Furthermore, trade talks between India and the USA are currently underway. It is expected that an in-principle agreement between the two countries will be reached soon. Moreover, Trump has not specified whether he wants Apple to shift the entire iPhone supply chain to the USA. If the latter is the case, then it is highly unlikely that the American consumer would be happy to pay $3500 for a smartphone that costs $1199 right now.
Therefore, the 25% tariff threat appears to be another media stunt that Donald Trump is likely to withdraw from in the near future.
