US tariff policy: Will the iPhone become significantly more expensive?

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Following US President Donald Trump's announcement to introduce higher import tariffs in the USA for a number of countries around the world, many Apple fans on social networks are wondering how this will affect the iPhone and other technology products. Vietnam, Thailand, China, Taiwan and India alone are the most important countries for Apple with suppliers on the list. The exact extent is still difficult to estimate – and a distinction must also be made between the impact on US and EU consumers. However, one analyst from the supply chain has already outlined the options Apple now has and how these could affect consumer prices.

Ming-Chi Kuo from the financial analyst firm TF International Securities in Taiwan assumes that Apple's gross profit margin could fall by 8.5 to 9 percent overall as a result of the announced US tariffs, as the iPhone manufacturer has to expect significantly higher costs. This is probably also how investors see it: like other technology stocks, Apple's share price fell massively after Trump's announcement. But the good news is: according to Kuo, Apple could reduce the impact to 5.5 to 6 percent or, in the best case, even to 1 to 3 percent without having to increase prices.

India now more important than ever

According to Kuo, the key to this is the location of iPhone production. For years, Apple has been pushing ahead with the project to become less dependent on China as a production country and to produce the iPhone more in other countries, above all India. Kuo is optimistic that, unlike the tense relationship between China and the USA, there is room for negotiation for India to agree lower tariffs with the United States. The impact on Apple would then be significantly lower.

However, given the high volume of devices manufactured in China, this sounds easier than it actually is. Even during the increasing tensions surrounding Taiwan, Apple tried to free itself from its dependence on China. In view of the production capacities required, this process requires a great deal of patience and is unlikely to be pushed forward on a massive scale in the short term. This year, Apple is expected to be able to handle 15 percent of its global iPhone production in India - an increase of 3 to 5 percent compared to the previous year.

Where Apple can still make savings

Kuo therefore mentions other possible measures that Apple can take. In his opinion, the company could push for mobile network operators to subsidize the devices more in new cell phone contracts so that the iPhones remain affordable for consumers. Pressure on suppliers could also help to reduce costs.

On the consumer side, Apple could compensate for the higher costs by paying less money than before for trade-ins of older devices. And Kuo is convinced that buyers of Pro devices are more willing to bear a price increase than buyers of cheaper devices, especially as the higher-priced devices make up a high proportion of sales.

Kuo: manageable for Apple

All in all, the analyst is confident that Apple will be able to cope with the tariffs quite well. The total gross margin, i.e. how much Apple earns from a device minus costs, was 46% in the 2024 financial year. Even a figure of less than 40 percent is manageable, especially as Kuo assumes that this slump will only be short-lived if Apple takes some of the measures mentioned.

The long-term effects will be more problematic if existing devices are used for longer and new purchases are postponed due to the threat of recession and consumer restraint.

(mki)