Apple reportedly stepped up importing iPhones ahead of the tariff announcement
Investment bank Morgan Stanley has told investors that while Apple may have brought forward some iPhone 16 production ahead of Trump’s new tariffs, there is little more it can do to mitigate a $33 billion cost increase it is about to incur.
President Trump did not expect China to retaliate against his tariffs, and Morgan Stanley says its analysts didn’t even contemplate tariffs being this high. But reportedly, Apple did at least expect that it would fail to get exemptions this time around.
According to a Morgan Stanley note to investors seen by AppleInsider, the company’s analysts claim to know that “Apple has pulled forward some iPhone builds.” There are no further details, but depending on the quantity of iPhones already completed and imported into the US, Apple could hold off price increases for a time.
The iPhones that have already been built will have to come from the iPhone 16 range. The iPhone 17 isn’t far enough along in development to have anything stateside yet.
And, Apple generally uses “just in time” production, and doesn’t hold vast quantities of stock. It is this trait of CEO Tim Cook, in part, that helped him land the job.
Apple’s US manufacturing will not help
Morgan Stanley notes that Apple has announced a $500 billion investment in US manufacturing, but as AppleInsider has previously noted, the investment claim was a political re-phrasing of Apple’s existing plans.
The investment analysts say that even taking into account Apple’s US efforts, it remains the case that close to 100% of its manufacturing is done internationally. Unless Apple were to significantly increase its US production, manufacturing in the States will make no contribution to reducing the impact of the tariffs.
Such increased investment in direct US manufacturing would require a great many years to materialize, and Morgan Stanley doesn’t believe Apple will do it.
Consequently, the investment firm expects that raising prices is the most likely way Apple can mitigate the impact of the tariffs. The analysts note that the tariffs affect all companies, “so the playing field has been somewhat leveled,” but equally higher prices is guaranteed to hurt sales.
Apple shares will continue to fall
Morgan Stanley had predicted that Apple’s shares would fall to at most between $200 and $210, based on its expectations of a 20% tariff on China. “Clearly, this scenario did not contemplate a 54% China tariff, 46% on Vietnam, 36% on Thailand, and 26% on India,” wrote the analysts.
Now that Apple’s shares have already fallen below the $200 it believed was the worst-case scenario, the analysts have revised their forecast down. They now predict that the stock could fall to $172 per share, having been at $225.19 before the tariffs were announced.
Immediately following the announcement, Morgan Stanley estimated that the overall impact on Apple’s earnings would be in the order of $33 billion annually, or a drop in earnings per share (EPS) of 26%.
Given the information about Apple pulling forward iPhone production, and a supposition that it will have been pressuring suppliers to share in the tariff costs, Morgan Stanley has revised its estimate. It now anticipates Apple’s EPS to drop by between 10% and 15%.
All of its figures are of course based on the company’s latest research, though. The note to investors specifically says that “it’s just far too early to gain conviction that we’ve seen the end of the pain trade lower.”
Apple will not get an exemption
Answering questions put to it by investors, Morgan Stanley said that it thinks Apple has at best a 1 in 5 chance of getting an exemption from the tariffs. This is chiefly because, as Morgan Stanley points out, this round of tariffs is structured in a way that makes exemptions less possible.
Previously, Apple managed to get its devices and components onto the list of exemptions that the Trump administration published. This time, Morgan Stanley says that the new tariffs have been implemented through the International Emergency Economic Powers Act (IEEPA).
This means that there is no similar product list, nor any facility for Apple to even apply for an exemption. The sole way to get an exemption under the new tariffs is by specific order from the President.
President Trump has already said that there will be no exemptions for any firm or any product, beyond an incredibly narrow list of components and raw materials that will have little effect on Apple’s production.
In theory, Congress may act. But, given Republican control, any large-scale action to assist Apple and defy the president seems unlikely.
It’s also just far too complicated. Trump’s tariffs have hit every single supplier Apple uses worldwide.
