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Investing.com -- President Trump’s recent threat to raise tariffs on India could significantly impact Apple (NASDAQ:AAPL)’s manufacturing operations, potentially increasing the company’s annual tariff-related costs to $10 billion and reducing operating income by 7%, according to Deepwater Asset Management Managing Partner Gene Munster.
During an appearance on Squawk Box, Trump suggested he might "raise tariffs very substantially over the next 24 hours" from the current 25% level if India doesn’t reduce its oil purchases from Russia. This poses a challenge for Apple, which has shifted iPhone manufacturing for the U.S. market from China to India over the past two years to mitigate tariff impacts.
"If India raises tariffs to 50% and Apple fails to secure an exception to reciprocal tariffs, it could have an additional 4% negative impact on operating income," Munster said.
Apple’s CFO Kevin Perak noted on the company’s June earnings call that "the vast majority of the products," including iPhone, Mac, and iPad, were now made outside of China. Munster estimates this "vast majority" represents about 70% of production.
For the June quarter, Munster calculated that approximately 11% of Apple’s overall revenue was subject to tariffs, resulting in $800 million in tariff-related costs, which reduced operating income by about 2%. The company’s guidance for the September quarter includes $1.1 billion in tariff-related costs, which Munster believes factors in India moving from being exempt to facing a 25% tariff starting on August 1.
Despite the threats, Munster expects Apple will ultimately receive favorable treatment. "While no company is ’too big’ to avoid tariffs, Apple orbits at a higher level. Apple’s success reflects well on US innovation more broadly. Trump knows this, and I believe he will ultimately work to ensure Apple doesn’t feel much, if any, of the long-term tariff pain."
Since mid-May, Trump’s rhetoric toward Apple has grown more confrontational, with at least five public comments targeting the company’s overseas manufacturing. However, Apple’s position as a symbol of U.S. innovation and global tech leadership may complicate any decision to impose full tariffs on the company.
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