Apple has successfully navigated its most significant challenge since the pandemic—at least for now.
The 125% tariffs imposed by Donald Trump on products manufactured in China posed a threat to Apple’s supply chain that could rival the disruptions caused by COVID-19 five years ago. However, on Friday evening, the U.S. president granted Apple a crucial reprieve, exempting several sought-after consumer electronics, including iPhones, iPads, Macs, Apple Watches, and AirTags.
Additionally, the 10% tariff on goods imported from other countries has been lifted for these products.
Though there could still be a newly established sector-specific tariff on goods containing semiconductors and the 20% tariff on China remains, this development is a victory for Apple and the consumer electronics sector, which continues to depend significantly on manufacturing in Asia.
“This is a huge relief for Apple,” noted Evercore ISI analyst Amit Daryanani in a Saturday report. “The tariffs would have led to significant increases in material costs.”
He anticipates a rebound in Apple shares on Monday following a recent 11% decline.
Prior to the exemption, Apple had considered a plan to shift its supply chain by producing more iPhones intended for the U.S. market in India, where tariffs would be considerably lower. Apple executives believed this strategy would help them sidestep the high tariff on goods from China and prevent major price increases.
India’s iPhone facilities are poised to produce over 30 million iPhones annually, potentially fulfilling a significant portion of American demand. Currently, Apple sells between 220 million and 230 million iPhones each year, with roughly one-third of those sold in the U.S.
Such a transition, however, would be complex, especially with the iPhone 17 already in the pipeline for production primarily in China. Within Apple’s finance and marketing segments, concerns had grown regarding the possible effects on the autumn release of new models, escalating anxiety.
In just a few months, Apple would have faced the daunting challenge of shifting more iPhone 17 production to India or other locations, likely necessitating price hikes—still a possibility—and negotiating for better margins with suppliers. Furthermore, Apple’s renowned marketing team would have needed to persuade consumers of the merits of these changes.
Yet, uncertainty lingers. White House policies may change again, requiring Apple to consider more substantial adjustments. For now, however, the management can breathe a sigh of relief.
Another issue arises: if Apple rapidly shifts more production away from China, what form might China’s retaliation take? The company derives about 17% of its revenue from China and has numerous stores there, setting it apart from many U.S. companies. An Apple spokesperson did not provide a comment.
China has initiated competitive investigations into U.S. firms and could create difficulties for Apple through its customs processes. Recently, the Chinese government also prohibited the use of iPhones and other U.S.-designed devices among its government employees, following a U.S. crackdown on Huawei Technologies Co.
The iPhone remains Apple’s top revenue generator, with approximately 87% of its production located in China, per Morgan Stanley estimates. Roughly 80% of iPads and 60% of Macs are also manufactured there.
Combined, these products account for about 75% of Apple’s annual revenue. However, the company has shifted almost all of its Apple Watches and AirPods production to Vietnam, with some iPads and Macs also being made there and Mac production expanding in Malaysia and Thailand.
According to Morgan Stanley, the U.S. market represents about 38% of iPad sales, as well as approximately half of revenue from Macs, Apple Watches, and AirPods.
A complete separation from China—Apple’s manufacturing base for many years—seems improbable. Despite Trump’s calls for Apple to produce iPhones domestically, the shortage of engineering and manufacturing expertise in the U.S. makes such a move highly challenging in the near term.
The scale and efficiency of Chinese facilities are unrivaled, making them essential for Apple’s sales outside the U.S. Nearly 60% of the company’s revenue comes from international markets.
Following the announcement of tariffs on April 2, Apple lobbyists and other tech companies have been advocating for exemptions to the White House.
The urgency of these discussions intensified recently due to escalating retaliatory measures between Washington and Beijing, which resulted in effective duties of 145% on imports from China.
The potential implications were even more pronounced as Trump suspended higher tariffs on other countries, giving Apple’s competitor, Samsung Electronics Co.—which manufactures outside China—a competitive advantage.
Apple and other firms have communicated to the Trump administration that while they are open to increasing their investments in the U.S., there is little incentive to relocate final assembly to the country. Instead, they contend that the focus should be on bringing back higher-value jobs and fostering investment in areas such as semiconductor production.
