Investment bank Morgan Stanley believes that the CEOs of US big tech were unprepared for how steep Trump’s tariffs ended up being, and will now — probably unsuccessfully — try to persuade him to make changes.
Morgan Stanley previously estimated that Apple will take a $33 billion hit to its bottom line because of Trump’s tariffs. In a note to investors seen by AppleInsider, Morgan Stanley’s analysts confirm that Apple has it bad — but its analysts now predict that for Dell and HP, the loss will be close to the entirety of their expected net income in 2025.
The analysts further believe that technology hardware executives didn’t anticipate that the tariffs would be as ruinous as they are. Consequently, the industry’s most influential business leaders like Tim Cook, Satya Nadella, and Mark Zuckerberg will surely attempt to lobby and negotiate with the current administration.
And, Morgan Stanley doubts this will be successful.
It’s true that Apple managed to get tariff exemptions during Trump’s previous administration, but it has failed to do so now. That’s in part because of how the new tariffs have been implemented.
Previously there was a long list of specific product types that were affected, but this time there is no such list to be negotiated. It is instead a blanket tariff.
Plus while Trump routinely flips his decisions, though, he has so far been adamant that there will be no exemptions and no exceptions to the tariffs. He’s determined that imposing these high tariffs will make companies move production to the US.
Morgan Stanley concludes that this won’t happen, and probably can’t. A significant barrier is the available labor in the States, which it says is simply insufficient.
Then according to its discussions with firms in the Electronic Manufacturing Services (EMS) industry, Morgan Stanley reports that it would take at least nine months to start up manufacturing in the US. That’s an extremely optimistic figure, to, as the majority of EMS sources estimated that in practice it would take years.
It would certainly be excruciatingly expensive. Based on the costs of previous Chinese manufacturing projects, Morgan Stanley estimates the cost of moving manufacturing to the US would cost hundreds of billions of dollars.
That would again presume skilled labor was available, which it is not in the quantities Apple needs, let alone the rest of big tech. And the figure does not include any measure of the typical wage disparity between the US and South East Asia, which may mean that manufacturing in the US provides zero cost savings, even with impactful tariffs.
Then there is also the extreme uncertainty over the tariffs in the long term as the next US administration is unlikely to retain them. There is extreme uncertainty in the short term, too, given Trump’s previous history of changing decisions.
Morgan Stanley does note that, partly following Trump’s tariffs in his first term, firms have been diversifying away from China. But they’ve been moving to Taiwan, Vietnam, or India, and every location is now subject to heavy tariffs.
So while the analysts recognize that there could be some value in moving production to different countries, there is no value in moving it to the US, and it won’t happen while the current administration is in power. And what benefit Apple or others could get from reshoring to other countries will be insufficient to prevent them having to raise prices.
