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Investing.com -- Jefferies analysts warn that proposed U.S. tariffs on Chinese imports could significantly impact Apple’s profitability, estimating a potential 14% reduction in the company’s net profit for fiscal 2025 if it is not granted an exemption.
Apple (NASDAQ:AAPL) was exempted from tariffs during Donald Trump’s first presidency, and Jefferies believes it could receive similar treatment this time.
"Our base case remains AAPL will be exempted from China tariffs," the firm stated. However, if Apple is not exempt, and "37m of iPhones made in China to be imported into the US will be subject to 54% tariff," the company could face a substantial financial hit.
Apple recently announced plans to invest $500 billion in the U.S. over the next four years, including supporting TSMC’s Arizona chip plant and creating 20,000 jobs.
Jefferies believes this commitment could improve Apple’s chances of securing an exemption.
Currently, about 85% of iPhones are assembled in China, while 15% are made in India, according to the firm.
The U.S. market accounts for roughly one-third of global iPhone sales. The tariffs, which include a 54% rate on Chinese imports and 26% on Indian imports, have already triggered a selloff in Apple’s supply chain stocks.
Even if Apple is exempted, Jefferies expects the company to accelerate its supply chain diversification.
"It will need to accelerate its supply chain diversification efforts, and thus needs to pay its suppliers better and give more share to those who could help AAPL achieve this objective," the firm noted.
Companies like LY iTech, which has capacity in India, and Luxshare, which has operations in Vietnam, could benefit from this shift.
Despite concerns over the tariffs, Jefferies maintains a more favorable view of Apple’s supply chain players than the company itself, citing potential upside for suppliers that support its diversification strategy.