Apple Stock Jumps as Trump Spares Smartphones from Reciprocal Tariffs
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Apple stock is trading higher in early US price action today after US President Donald Trump spared tech products like smartphones, computers, and semiconductors from the reciprocal tariffs which were set at 125% for China.
While imports from the Communist country will still attract the 20% fentanyl-related tariffs that Trump previously announced, the removal of the reciprocal tariffs came in as a big relief. Along with Apple, names like Dell, HP, and Nvidia are also up sharply today.
Apple Gets a Tariff Respite
The tariffs were a significant headwind for Apple and Dan Ives of Wedbush Securities termed them an “Armageddon scenario” for the US tech sector. Notably, while Apple has been diversifying its supply chain to countries like India and Vietnam, it still sources most of its products from China.
Ives estimates that 90% of iPhones and between 75% and 80% of iPads are produced in China
While Trump has been pushing for onshoring of manufacturing, analysts believe that it would dramatically increase the costs of iPhones. “You build that (supply chain) in the US with a fab in West Virginia and New Jersey. They’ll be $3,500 iPhones,” said Ives.
Several analysts slashed Apple’s target price after Trump’s China tariffs. However, brokerages have welcomed the exemption for tech products even as some still remain circumspect.
Apple Gets an Upgrade After Trump’s Tariff Climbdown
“The net effect is positive for tech, especially for giants like Apple, which could’ve seen their entire pricing strategy thrown into disarray under the proposed 145% China tariffs,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
He added, “Instead, this reprieve, and news that further tariffs will be a couple of months away, gives Apple time to build up its US inventory to cover the current iPhone sales cycle without needing knee-jerk price hikes.”
KeyBanc Capital Markets analyst Brandon Nispel upgraded Apple to a “sector weight” from ‘underweight. “Late Friday’s announcement of exception from tariffs on smartphones is probably the best case scenario we can think of for Apple, which makes it unlikely that our prior downside price target (of $170 per share) would be achieved, and takes a big risk off the table,” said Nispel in his note.
JPMorgan Raised Its Target Price on Apple
JPMorgan also termed the climbdown as a “big relief” for Apple and said, “somewhat manageable level that Apple would be able to plan for over the coming months with a clear pass through to US consumers while absorbing some by itself/supply chain.”
“The exemption will help return investor focus back to some of the medium-term drivers, but we expect several concerns to remain from the developments over the last two weeks and limit investors from immediately turning to any bull case focused on upside drivers relative to evaluating downside to earnings expectations in recent weeks,” said JPMorgan analyst Chatterjee while raising Apple’s target price by $25 to $270.
Trump Signals New Tariffs on Tech Products
Meanwhile, in a Truth Social post, Trump said, “NOBODY is getting “off the hook” for the unfair Trade Balances, and Non Monetary Tariff Barriers, that other Countries have used against us, especially not China which, by far, treats us the worst!”
He emphasized, “We are taking a look at Semiconductors and the WHOLE ELECTRONICS SUPPLY CHAIN in the upcoming National Security Tariff Investigations. What has been exposed is that we need to make products in the United States, and that we will not be held hostage by other Countries, especially hostile trading Nations like China.”
Separately, Commerce Secretary Howard Lutnick also said that the exempted electronics would face separate new tariffs over the next two months.
Some analysts remain cautious on Apple shares given the hanging sword of separate tariffs on tech products. Also, a slowing US economy could work to the detriment of Apple.
Recession Fears Rise
Several economists have warned of a recession amid the escalating global trade war. JPMorgan for instance has raised the odds of a US recession this year to 60% as compared to 40% before the tariff announcement. In his note, Bruce Kasman, head of global economic research said, “These policies, if sustained, would likely push the US and possibly global economy into recession this year.”
Allianz’s Chief Economic Advisor Mohamed El-Erian has also warned about the growing risk of a recession. Separately a Deutsche Bank survey shows a nearly 50-50 chance of a recession. UCLA Anderson Forecast has also recently issued its first-ever recession watch amid concerns over Trump’s policies.
Speaking at a business journalism conference in Arlington, Va. Fed chair Jerome Powell said, “Higher tariffs will be working their way through our economy and are likely to raise inflation in coming quarters.”
He added, “While uncertainty remains elevated, it is now becoming clear that tariff increases will be significantly larger than expected, and the same is likely to be true of economic effects, which will include higher inflation and slower growth.”
US-China Tensions Are Hurting US Companies Also
Meanwhile, growing US-China tensions are also working to the detriment of US brands. China is increasingly becoming a tough market for foreign brands like Apple, General Motors, and Starbucks and they have been losing market share to domestic Chinese companies.
Apple lost its position as the biggest smartphone seller in China last year and fell to the third spot as domestic Chinese rivals gained market share at the iPhone maker’s cost. Vivo was the top-selling brand in the world’s second-biggest economy last year followed by Huawei whose sales have surged over the last two years.
According to data from research firm Canalys, Apple’s shipments in China fell 17% YoY in 2024 which was the biggest annual decline for the Cupertino-based company. Moreover, its shipments fell in all four quarters with the pace of decline widening to 25% in the fourth quarter.
Apple had a full-year market share of 15% in China last year while Huawei and Vivo respectively had a 16% and 17% share. Huawei has come up with competitively priced premium models and has grabbed significant market share from Apple.
