Apple will incur some losses in the coming quarter, as it is willing to face them head-on instead of passing them on to the end user. During the company’s earnings call amid hefty tariff concerns, Apple CEO Tim Cook explained how the new tariffs imposed by the Trump administration would have a direct impact on the pricing strategy of different products. The Trump administration has currently put a hold on reciprocal taxes, but the time will eventually run out. In the meantime, Apple could negotiate some terms if it wants to amend the percentages.
Apple will absorb the $900 million tariff cost this quarter without passing it on to consumers
At its earnings call, Apple stated that it will incur $900 million from tariffs only this quarter, and the cost will be absorbed by the company itself rather than the consumer. However, Tim Cook did not rule out any price hikes that might be coming our way. Cook states, “Obviously, we’re very engaged in the tariff discussions,” and the byproduct of this discussion is yet to be seen.
“We believe in engagement and will continue to engage. On the pricing piece, we have nothing to announce today. I’ll just say that the operational team has done an incredible job around optimizing the supply chain of the inventory, and we’ll obviously continue to do those things to the degree that we can.”
Apple has already started preparing for the worst, as it is moving production outside of China for some products, with India and Vietnam being the possible regions in which to manufacture iPhones and other devices. While these countries are also subject to import tariffs in the United States, the percentages are far less than that of China, which would make production significantly cheaper, but still more expensive than before.
Any tariff exemptions that Apple or other tech companies will receive will be short-lived, and a new equilibrium will be formed, raising the average cost of products. The U.S. government wants manufacturers to set their bases in the country for local manufacturing, which seems like a very time-consuming process. According to Trump, the higher the taxes, the faster these companies would migrate.
At this stage, we are expecting Apple to keep the price of the current iPhone models the same, but going forward, the iPhone 17 lineup could see a major price hike coupled with a higher cost of production. We will keep you updated on the matter, so do stick around for extensive coverage of Apple’s earnings call.
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