Trade War Forces Apple To Rethink Everything

On Wednesday, Apple held its quarterly earnings call following the release of its earnings for the previous quarter. And on the call, Apple’s CEO, Tim Cook, talked about the tariffs being put on other countries by President Trump. Cook also laid out some of the potential impacts on Apple’s business.

Cook said that given the current tariff rates and policies do not change frot he balance of this quarter, and no new tariffs are added “we estimate the impact to add $900 million to our costs.” He then clarified that “this estimate should not be used to make projections for future quarters, as there are certain unique factors that benefit the June quarter.”

Cook also expanded more on what the tariffs could mean for Apple. Stating that “for the June quarter, we do expect the majority of iPhones sold in the US will have India as their country of origin, and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch and Airpods products also sold in the US.” He went onto say that China would continue to be “the country or origin for the vast majority of total product sales outside the US.”

During the Q&A session on the call, Cook went ahead and did some math on the tariffs.

If you look at the categories of tariffs that are applicable of us today, for the June quarter, most of our tariff exposure relates to the February IEEPA-related tariff at the rate of 20 percent, which applies to imports to the US for products that have China as their country of original. In addition, for China, there was an additional 125 percent tariff for imports of certain categories of products announced in April. For us, that’s some of our US AppleCare and accessories business, and brings the total rate in China for these products to at least 145 percent.

Cook also mentioned that the vast majority of its products are not subject to the global reciprocal tariffs that were announced last month. This is because “the Commerce Department has initiated a Section 232 investigation into imports of semiconductors, semiconductor manufacturing equipment, and downstream products that contain semiconductors.”

Tim Cook was careful not to predict the costs beyond June

The way things are going with this worldwide trade war, Apple’s CEO was careful not to predict what could happen after June. And that’s a good way to do it. As the tariffs have changed multiple times already, and they were announced exactly a month ago today.

As of today, we’re looking at 20% reciprocal tariffs on every country, and 145% on China. However, tariffs on every country but China were delayed by three months. Which could be the “unique factors” that Cook was referring to.