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Trump's tariff on goods from China may be a & # 39; gut punch & # 39; for Apple




President Trump's decision to impose a $ 10 billion US $ 300 billion tariff in Chinese goods could spell trouble for Apple, potentially weaken iPhone demand and adversely affect the company's earnings per share, according to Wedbush Securities analysts Daniel Ive and Strecker Backe.

In a new note describing possible ramifications of the Apple tariff, Wedbush analysts called the move a "potential gut punch" for the company. If Apple takes the tariff fully, it could negatively impact the company's earnings per share by about 4% in fiscal year 2020, analysts said.

Should Apple pass the tariff on to consumers, it could weaken iPhone demand by about 6 to 8 million units, based on Wedbush's analysis over the next 1[ads1]2 months driven by the aggregate unit forecast of 185 million iPhones for fiscal year 2020. [19659002] "After Cook & Co. navigated in significant noise and headwinds the last bulls wanted to see today, this was news from the Trump administration as Apple is clearly caught in the crossroads between DC and Beijing," analysts wrote in the note.

Read more: Don't buy a new iPhone right now

Wedbush maintains its better performance for Apple.

Apple did not immediately respond to Business Insider's request for comment on how the new tariffs could affect business.

This is not the first time Wall Street has discussed the possible consequences Apple could have as a result of the ongoing trade dispute with China. Back in May, a team of Morgan Stanley analysts led by Katy Huberty suggested that the $ 1,000 iPhone XS price could see a $ 160 price increase due to a 25% toll on the $ 200 billion Chinese goods the Trump administration previously introduced.

President Trump announced on Twitter August 1 that a 10% additional duty on $ 300 billion Chinese goods was to take effect September 1.

China is critical of Apple for two reasons: The company relies on facilities in China to produce products such as the iPhone, and the Greater China Region is Apple's third largest market behind America and Europe.

Reports from Bloomberg and The Wall Street Journal had also suggested that Apple was planning to move production of Mac Pro, which had been the only major Apple product made in the United States, to China. But CEO Tim Cook said recently on the company's revenue talks that it wants to continue making Mac Pro in the United States, after a report by Bloomberg that it had sought exemptions from Trump's China tariffs for components for the new computer.

Apple has been eyeing to shift some production from China to India and Vietnam, according to reports by Bloomberg and Reuters.

But to do so would represent a large enterprise. In a best-case scenario, Apple might only be able to move between 5% and 7% of some iPhone models to India over the next 12 months, Ives previously told Business Insider.

"Apple has really focused its production on China and Foxconn," he told Business Insider in June. "It's like General Motors or Ford say we're going to move away from Detroit."



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