Investing.com — In a observe to shoppers Friday, Jefferies analysts outlined the potential affect of elevated tariffs on Apple (NASDAQ:)’s iPhone if former President Donald Trump reintroduces larger commerce obstacles throughout a potential second time period.
Whereas Apple has made efforts to diversify its manufacturing past China, the agency mentioned the corporate stays closely reliant on the area, leaving it weak to proposed tariffs.
In accordance with Jefferies, “Trump could elevate tariffs on Chinese language imports to 60% and elsewhere to 10%.”
Though Apple was exempt from tariffs throughout Trump’s earlier time period, analysts warn this will not occur once more.
With solely 10% of iPhone manufacturing at present exterior China, Jefferies says the worst-case state of affairs may see the corporate face a $256 per telephone tariff on its flagship iPhone 16 Professional Max.
This could signify 22% of the telephone’s common promoting worth (ASP) within the U.S.
The agency highlights that the final word affect on Apple’s gross margins (GM) would rely on the state of affairs. They clarify that in essentially the most extreme case, the place all non-U.S. content material is taxed at 60%, Apple’s gross margins may decline by 6.7 proportion factors, decreasing the corporate’s discounted money circulation (DCF) valuation by roughly 10%.
A much less punitive state of affairs, the place solely Chinese language-made content material is taxed at 60% and different non-U.S. content material at 10%, may reduce gross margins by three proportion factors and cut back valuation by 5%.
“Draw back [is] removed from being disastrous,” Jefferies notes, however stresses that growing calls for for native manufacturing in markets like India and Indonesia pose extra long-term challenges.
These pressures, coupled with margin reductions from relocating meeting traces, may pressure Apple’s provide chain profitability within the years forward, in keeping with the funding financial institution.
Whereas tariffs is perhaps manageable, Jefferies warns they “could solely be the beginning of a longer-term downside of rising prices attributable to localizing manufacturing.”