Apple reported on Thursday that first-quarter profits exceeded expectations, but warned that U.S. tariffs could cost the company and were disrupting its supply chain.
CEO Tim Cook said Apple expects U.S. tariffs to be charged $900 million in the quarter even if its influence is limited early this year.
Cook said he expects “most iPhones sold in the United States will use India as their country of origin”, adding that Apple's products are currently exempt from Trump's worst reciprocity tariffs.
“We cannot accurately estimate the impact of tariffs because we are unsure of potential future actions before the end of the quarter,” Cook said. “Assuming current global tariff rates, policies and applications will not change the balance for the quarter and no new tariffs are added, we estimate the impact of the impact is an increase of $900 million in costs.”
Tit-for-Tat exchanges see high taxes imposed on China, and Beijing has set retaliatory barriers to U.S. imports.
High-end technology products such as smartphones, semiconductors and computers received temporary probation from U.S. tariffs.
“Apple actively accumulates inventory ahead of the expected tariff policy,” said Le Xuan Chiew, research manager at Canalys. “As the reciprocal tariff policy continues to fluctuate, Apple may further transfer U.S. combined production to India to reduce exposure to future risks.”
According to Canalys, while mainland China still accounts for most of the U.S. shipments, India's production gradually increased at the end of the quarter.
Cook said Vietnam will be the country of origin for almost all iPad, Mac, Apple Watch and Airpod products.
He insists that China will continue to be the place where most Apple products are sold outside the United States.
According to the earnings report, Apple's revenue of $95.4 billion in the recently concluded quarter was driven by iPhone sales, and the company's revenue in the Chinese market was $17 billion. Profits for the quarter were $24.8 billion.
Apple's shares in after-sales transactions fell more than 3%.
“The real story is Tim Cook's plan to address these unprecedented trade challenges,” said eMarketer analyst Jacob Bourne.
Apple's plan to move manufacturing to India “proposes urgent questions about execution timelines, capacity constraints and potentially inevitable cost increase, which will reduce profit margins, transfer to consumers or have multiple consequences,” Bourne added.
GC/ARP
