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Investing.com - Only roughly 5% of Apple (NASDAQ:AAPL)’s supply chain footprint is represented in Vietnam, according to analysis from UBS which came after the U.S. announced a trade agreement with the Southeast Asian nation.
On Wednesday, President Donald Trump unveiled a deal with Vietnam that he said will set a 20% tariff rate on items incoming from the country, a key source of goods sold in the U.S. Analysts noted that this rate was lower than the punishing “reciprocal” levy Trump unveiled at his “Liberation Day” event in early April.
The agreement also places a 40% tariff on so-called “transshipping,” a move that could indirectly have consequences for China. The White House has claimed that countries like Vietnam have become conduits for Chinese goods to be sent to the U.S. while evading heightened American duties.
While preliminary and abbreviated versus traditionally more comprehensive trade pacts, the deal was seen as an indication that the Trump administration was making progress in reaching new trade accords prior to the re-imposition of the now-paused reciprocal tariffs later this month. Trump has previously reached trade truces with China and Britain, and has hinted at a possible deal with India.
Writing in a note to clients, the UBS strategists said they expect the agreement’s impact on Apple’s finances will be "limited," citing the tech giant’s muted sourcing from the country compared to its activities in China.
"Although Vietnam has been a key region for supply chain investment, the scale and scope of the offerings in the country relative to China is small," the analysts said, adding that mainland China still represents around 35% of the total discrete locations in Apple’s supply chain.
They also noted that Apple’s flagship iPhone is typically assembled in China and India, while less popular items like iPads and MacBooks can trace some of their production back to Vietnam.
"Given the relatively small physical footprint and focus on ancillary products, a 20% tariff on imports into the U.S. will have a negligible impact on Apple margins in our view," the UBS analysts wrote.
UBS has a "neutral" 12-month rating of Apple’s stock and a price target of $210. At the end of U.S. trading on Wednesday, shares of Apple had inched up by 2.2% to $212.44.