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Investing.com-- Apple Inc (NASDAQ:AAPL) faces a hit to its gross margin from U.S. President Donald Trump’s steep trade tariffs against China and India, which are key manufacturing hubs for the iPhone maker, Citi said in a note.
Citi estimated that over 90% of Apple’s manufacturing happens in China, and that if the country were to not receive exemption from Trump’s new tariffs, it could see a 9% hit to its total gross margin.
China was by far the worst hit by Trump’s latest tariffs, which add about 34% in new duties and bring overall U.S. tariffs on Chinese imports to 54%. This bodes poorly for companies with large supply chain exposure to China, with Apple manufacturing a bulk of its electronic devices in the country.
Apple also has supply chain exposure to Taiwan, which was hit with 32% tariffs.
Trump also imposed about 26% tariffs on India, which stands to hit Apple’s gross margin by about 0.5%, assuming that the remainder of Apple’s production is manufactured in the country, Citi said.
Still, Citi flagged a wait-and-see approach towards how the tariffs will be implemented.
Apple’s shares slumped as much as 7% in aftermarket trade on Wednesday, leading losses among their peers in Wall Street’s Magnificent Seven.
Trump on Wednesday imposed sweeping tariffs on exports to the U.S., with a 10% universal duty and tariffs against major trading partners equivalent to roughly half of their duties on U.S. goods.
Tech and automobiles- two sectors with large exposure to international trade- are expected to be the worst hit by the tariffs. Trump also imposed 25% tariffs on all foreign automobiles, which came into effect on Thursday.
The tariffs will also be borne by U.S. importers, with businesses expected to pass on costs to consumers, underpinning U.S. inflation and increasing the risk of a global and U.S. recession.