[SINGAPORE] Apple iPhones could get more expensive on any upcoming US tariffs as the tech giant passes on costs to consumers, said a Citi report.
“We estimate (that) the iPhone selling price would go up 7 per cent globally if China/India total tariffs are 45 per cent/ 10 per cent, assuming another 25 per cent tariff on Apple products exported from China to the US through Section 232, and Apple (passing) all tariff costs to end customers,” Citi analysts noted in an Apr 21 report.
After US President Donald Trump announced tariffs on Apr 2 – comprising 10 per cent baseline levies for all US imports alongside steeper reciprocal tariffs for some countries – his later declaration of 125 per cent tariffs on China-made goods threatened to disrupt Apple’s supply chain given its heavy reliance on China.
His subsequent declaration of tariff exemptions for smartphones, computers and other electronics from China offered brief relief for tech companies such as Apple, HP and Dell.
But on Apr 13, Trump changed course again, vowing that none would get “off the hook”. He said then that the exempted products would be moved to a different tariff category and that the entire electronics supply chain would be reviewed.
US officials similarly said the tariff pause was temporary, warning that exempted products would soon face fresh levies.
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The Citi report noted that the Trump administration on Apr 1 launched a Section 232 investigation on semiconductors.
The section falls under the Trade Expansion Act, which requires investigations to determine whether certain imports pose a danger to US national security before a president can tax them – investigations under this law could open the door to more tariffs.
“As such, the tariff overhang on iPhones has not been removed, but simply paused,” Citi analysts wrote.
Noting that there is no tariff rate cap under Section 232, they added: “Based on the steel and aluminum Section 232 tariff of 25 per cent, we expect the potential Section 232 on iPhones could also be at the same level, if the Trump administration believes smartphone imports will threaten national security.”
iPhone shipment estimates trimmed
Atif Malik, Apple analyst at Citi, trimmed estimates for iPhone shipments, citing the bank’s expectations that global gross domestic product growth will shrink 0.7 per cent in 2025.
“As a result, iPhone shipments are expected to go down by 1 per cent in 2025 to US$226 million and slightly recover by 2 per cent to US$232 million in 2026. Despite that, we note the shipment estimate has not factored in the scenario where if Apple passes through some tariff costs to customers,” the Citi report said.
Sales volumes could tumble even further if the tech giant passes tariff costs to its customers, it added.
While suppliers such as Luxshare, Lens Tech and DBSJ stressed refusal to accept price cuts to share tariff costs, Citi analysts expect their profits to still be hit.
“Although we do not believe Apple suppliers would be impacted by tariffs directly, their profitability would likely be hurt given lower utilisation rates due to brands’ conservative business plans amid uncertainty, operating deleverage on production disruption due to shifting US tariffs,” said Citi’s Kyna Wong, Kevin Chen and Karen Huang.
Lower shipments of Apple products could push down utilisation rates, and brands could respond to shifting tariffs by either quickly restocking or pausing orders – causing production disruptions and higher costs, they pointed out.
They noted: “Android customers are more likely to ask for price concessions or delay upgrades amid macro uncertainty.”
Apple’s response
Apple shares dropped 19 per cent following the tariff announcement in a rout that saw the company lose more than US$637 billion in market value.
The tech giant took steps to mitigate the blow, going so far as to charter cargo flights to airlift some 1.5 million or 600 tonnes of iPhones to the US from India after ramping up production there. This was in an attempt to circumvent tariffs by shifting production to the South Asian nation, which faces lower levies than China.
India faces a 26 per cent tariff rate, which is substantially lower than the 125 per cent tariff rate imposed on China – the main manufacturing hub of iPhones.
Despite India’s exports to the US being cheaper than China’s ones after the Apr 11 tariff reprieve and the country’s ambitions to produce 25 per cent of Apple’s iPhones by end-2025 – up from the current 15 per cent that it makes – its production capacity is limited, Citi analysts said.
This is because it lacks capabilities to produce the Pro Max model – which accounts for a quarter of total iPhone shipments.
Hence, it will only be able to support 15 per cent of US iPhone sales in 2025, at most, Citi said.
Apple has attempted to diversify production away from China by making iPhones across a swath of manufacturing centres in other countries besides India, including Malaysia, Vietnam, Thailand, and Ireland – but even these nations were not spared tariff wrath.
