Apple attempted to mitigate the risks associated with its global supply chain by relocating the primary production of its iPhones from China to India. Yet, the Cupertino giant can't seem to get rid of its exposure to China, as per new commentary from a Jefferies analyst, who says that Apple will still ship around 9 million iPhones directly from China to the US.
Apple adopted a 2-pronged strategy to deal with import tariffs and trade war:
- It moved the primary production of its iPhones to India from China.
- When the Trump administration imposed heightened import tariffs on India as well, Apple won an exemption for its products by pledging to invest $600 billion in the US over the next few years to create a domestic end-to-end silicon supply chain.
These two steps largely removed the tariff and trade war-related risks for Apple. However, Trump again ratcheted up tensions with China's Xi Jinping on Friday by flagging the latter's increasingly belligerent curbs on rare earth exports, and threatening 100 percent tariffs on top of existing levies.
While the administration has since then walked back from the brink of an all-out trade war, with Trump commenting that November, when these new tariffs are slated to take effect, was still an "eternity" away, the macroeconomic climate has again turned cautious.
Jefferies: Apple Could See A 5 Percent Cut To Its Fiscal 2026 EPS If It Had To Pay A 130 percent Tariff On About 9 Million iPhone 17 Units Imported From China Into The United State
Against this backdrop, a Jefferies analyst has penned an interesting note today, laying out the scenario for Apple if the trade war with China escaltes.
Interestingly, despite Apple moving the bulk of its production activities to India, Jefferies believes that the Cupertino giant would still have to rely on some production in China to meet the soaring demand for iPhones in the US:
"Apple is unlikely to meet all U.S. demand from its Indian production base in the near term, making it more exposed if tariffs are enforced."
Specifically, Jefferies believes Apple could end up shipping as many as 9 million iPhone units to the US from China in FY 2026. Bear in mind that Apple's new fiscal year commences in October.
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