Apple Built iPhones on Globalization. Trump’s Tariffs Threaten That

The Washington Post

12:35 JST, April 9, 2025

SAN FRANCISCO — Steven Rubio’s husband had been planning to replace his old iPhone eventually – but he’s upgrading now because of President Donald Trump.

The trade war with China pushed Rubio and his husband to visit the Apple Store in downtown San Francisco on Monday afternoon and to upgrade before gadget prices rise.

Last week, Trump unveiled plans to dramatically raise tariffs on imports, including from China, where Apple produces the bulk of its iPhones. Trump is set to increase the minimum tariff on Chinese goods to 104 percent at midnight Wednesday, likely driving up the cost of Chinese-made goods in the United States. Over the years, the company has diversified its manufacturing base by ramping up production of its devices in India and Vietnam – two countries that Trump also hit with significant tariffs.

“We thought: ‘We better just go and grab it now,’ ” Rubio, a 66-year-old retiree, said of his husband’s purchase of an iPhone 16e. He added that some of their friends, too, have replaced iPads and other electronics with newer models after the tariff news.

Consumers such as Rubio aren’t the only ones rushing to insulate themselves from the potential fallout of the trade war. The entire tech industry is now grappling with a wave of stringent tariffs that threaten their supply chains and business outlook. Economists and analysts estimate that the price of a $1,000 iPhone could rise by $250 or more if tariffs persist.

The iPhone is in many ways the ultimate symbol of the age of globalized supply chains. It’s designed in California by highly paid engineers and designers. But it’s assembled in China and India with parts sourced from many different suppliers, each of which has its own complicated supply chain. The complexity has allowed Apple to become one of the world’s most valuable companies and a cultural and economic force.

Trump has declared an “economic revolution” that seeks to wipe away that system. Instead, he wants those supply chains and parts suppliers to be inside the U.S., employing American workers. “The army of millions and millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America,” Commerce Secretary Howard Lutnick said during a TV appearance on CBS News on Sunday.

It’s unclear whether companies such as Apple – with a hefty profit margin on high-end iPhones – will absorb the extra cost or pass it on to consumers. Some analysts say price increases could start in a matter of weeks, once Apple has sold all of its devices stocked in the United States.

“I just don’t see any other way around it,” said Ryan Reith, group vice president at the research firm IDC.

During Trump’s first term, Apple was exempt from broad tariffs. In February, the Cupertino company announced a commitment to invest $500 billion in the United States over the next four years, an overture that Trump thanked Apple CEO Tim Cook for on Truth Social. White House press secretary Karoline Leavitt said Tuesday at a briefing that products such as the iPhone could shift to U.S. manufacturing.

“Absolutely, [Trump] believes we have the labor, the workforce and the resources to do it. If Apple didn’t think the United States could do it, they probably wouldn’t have put up that big chunk of change,” she said.

For years, Apple has sought to mitigate the potential impact of trade policy targeting China by expanding its manufacturing base. AirPods, Apple Watches and MacBook laptops often bear “Made in Vietnam” labels. And while Apple’s signature product, the iPhone, was once solely assembled in China, the company has increasingly leaned on India to piece together some of its lower-end models as well as the iPhone 16.

No matter where those devices are assembled, components such as processors, screens, cameras, memory chips and modems flow from around the world to form finished products. In the case of the iPhone 16 Pro, the total cost of those parts works out to about $507 – just over half of the device’s retail cost, according to data from Counterpoint Research.

But even this diversification strategy appears to be under threat. The Trump administration has slapped some of the steepest tariffs on imports from China, India and Vietnam; unless it withdraws its own retaliatory tariffs, products imported from China will be subject to an eye-watering 104 percent tariff. Trump also put a 46 percent tariff on goods coming from Vietnam and a 26 percent tariff on imports from India.

“It’s almost like a betrayal because Apple was told to diversify its manufacturing base outside of China many years ago and they did it, but now India and Vietnam are also getting hit with tariffs,” said a person familiar with Apple’s plans, who spoke on the condition of anonymity because he was not authorized to speak publicly about tariffs.

As a potential short-term work-around, people familiar with Apple’s plans said it would ramp up production of iPhones in India to ship to the United States.

The overall uncertainty sparked a broad market sell-off after the tariffs were announced, with Apple alone seeing nearly $640 billion erased from its market capitalization through Monday. On Tuesday, Apple shares closed down an additional 5 percent.

News of the tariffs comes at a pivotal moment for Apple, as it weathers a downturn in consumer enthusiasm and stiffer competition in some key markets.

“iPhone 16 has already been lagging iPhone 15 sales since launch,” said Gerrit Schneemann, senior analyst at Counterpoint Research. “And carriers last year were complaining about record low upgrade rates, so we were already in a situation where people weren’t necessarily jumping to buy new smartphones anyway.”

The company also has been unable to capture a mainstream audience with its expensive Vision Pro headset and more recently faced blowback for the lackluster performance of some of its vaunted “Apple Intelligence” features.

Meanwhile, consumers overseas – especially in China – are increasingly turning to smartphones from Huawei Technologies and Samsung, while existing customers happily hang onto their Apple products.

If Apple is forced to hike iPhone prices, the move could inspire more consumers to hang onto their devices in September, when the company reportedly plans to unveil three new iPhone models, analysts said.

Apple’s push to produce more iPhones in India may not cushion it from a surge in iPhone prices. Because Apple can’t meet global demand with just the phones it produces in India, many will still be assembled in China – and it’s likely that whatever pricing decision Apple lands on will be applied uniformly.

Meanwhile, industry watchers are split on whether Apple will pass along the full brunt of these additional tariffs to consumers.

To IDC’s Reith, it doesn’t seem likely that Apple will swallow the cost of these new tariffs. “They never have in past tough times,” he said.

Counterpoint’s Schneemann says Apple is in a position to offset these new costs “better than most other companies” because of the iPhone’s hefty margins. Even if the company is unwilling to eat the cost entirely, a measured price hike could help keep people from skipping new iPhones.

A marginal increase in the cost of new iPhones could sting for people who purchase their new gadgets outright, he adds, but might not bother the many who pay for their phones over time through their wireless carriers.

The scope of Apple’s supply chain woes had some market watchers wondering about the possibility of bringing iPhone production to the United States.

If Apple did start producing the devices in the U.S., the one-two punch of steep American labor costs and a reliance on parts from predominantly Asian suppliers could mean significantly higher iPhone prices.

“iPhone manufacturing isn’t coming back to America,” said the person familiar with Apple’s plans.

Even Rubio, the smartphone-shopping husband, was skeptical: “We are not going back to the manufacturing country that we once were,” he said.