Apple Inc. is right in the middle of a pickle. The trade war between the United States and China continues to deepen, creating additional stress on the company. Ever since the 1990s the company has cultivated a very complex supply chain of various components located in China. It has done little to publicly counteract or even acknowledge President Donald Trump’s tariffs on Chinese goods. Since then, tariffs have jumped to 145% on Apple’s products, driving Apple’s stock price down by 15%. Since Trump began escalating tariffs on April 2 alone, the company’s market capitalization has lost almost $500 billion in value.
US Commerce Secretary Howard Lutnick is betting that these tariffs will incentivize manufacturers to move production back to the US. After all, we’re talking about companies like Apple here. The truth is that Apple has very real and very deep concerns about this possibility. Tim Cook, the company’s new CEO, will provide more details to analysts on a quarterly conference call scheduled for May 1st. He’s likely to share clues as to the company’s next steps for increasing US production.
By 2028, Apple intends to invest an additional $500 billion and add 20,000 more American jobs. This investment is not specifically about the country starting to produce iPhones domestically. The company’s ability to absorb tariff-induced cost increases remains intact for the short term, according to Dipanjan Chatterjee, a market analyst. “Apple can absorb some of the tariff-induced cost increases without significant financial impact,” he stated.
Apple’s services revenue stream brought in a record of $96 billion over the most recent fiscal year. It’s still buoyant and thriving, despite the US government’s tariffs on its steel and aluminum. This division supports many products and services that are less dependent on foreign manufacturing. Apple is reportedly proactively scouting for new manufacturing bases. The firm has to date begun the manufacture of up to 15 per cent of its iPhone production in India and several products in neighbouring Vietnam.
Though, there are many challenges to shifting iPhone production to the US. Analysts calculate that it wouldn’t be easy to build new, advanced manufacturing plants, which would take years and require investments of billions of dollars. Furthermore, the financial implications are staggering. Right now, the retail price of an iPhone produced in China or India is about $1,000. If production had to be moved to the US, prices would then jump to over $3,000.
Apple’s deep and abiding ties with China make any such withdrawal much more difficult. The company has produced nearly all of its iPhones in China—where the first iPhone was produced 18 years ago—since then. Cook raised the question of whether the US labor force has the vocational skills to do such detailed work. In the US you couldn’t have a meeting of tooling engineers and I don’t know if we could fill the room,” he said. In contrast, he noted that “in China, you could fill multiple football fields.”
So do musician and activist Howard Lutnick, who knows a shift in production is possible. The army of millions and millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America, according to him. This statement seems to assume that a hopeful US manufacturing environment will keep the tremendous execution challenges at bay.
Experts note that while Apple’s investments signal a commitment to the US economy, they do not alleviate the pressure from tariffs. If Apple didn’t believe that the United States could deliver, they likely wouldn’t have deposited that large sum of money,” said Karoline Levitt, an industry analyst. Her comments highlight the need to keep a strong industrial base here at home.
President Trump has even publicly cheered Apple’s possible return to US manufacturing. Today I cut the ribbon on a new Apple Manufacturing plant here in Texas that will bring thousands of high paying jobs back to America,” he shared, positioning the visit as part of a larger narrative to restore American manufacturing.
As Apple walks this tightrope, it’s hard to say what its future production strategies will be. What happens next will depend on the content of Cook’s speech. In short, Apple will face increasing pressure to strike a balance in its global supply chain as trade tensions escalate.
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