In This Article:
Key Points
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Apple faces new tariff threats from the Trump administration.
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The iPhone business is already flatlining, and a lucrative $20 billion deal with Google could go up in smoke.
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Apple's valuation is lofty and may not reflect the risks facing the company.
Shares of Apple (NASDAQ: AAPL) slumped on Friday in response to a new tariff threat from President Donald Trump. In a post on Truth Social, Trump threatened a tariff of at least 25% on all iPhones manufactured outside of the United States. Apple has been shifting some production from China to India, reportedly planning to make most of its U.S.-bound iPhones in India by the end of 2026.
While it's unclear whether the Trump administration has the authority to impose tariffs on individual companies, Apple is in a lose-lose situation. Manufacturing iPhones in the U.S. would likely be prohibitively expensive, leading to prices that are well out of reach for many iPhone users. Alternatively, sticking with the plan to use Indian manufacturers risks substantial tariffs that would also force significant price increases and dull demand.
There's no telling how all this will end, but Apple stock is looking like an especially risky proposition for multiple reasons.
A secondary tariff risk and little reason to upgrade
While the trade war instigated by the Trump administration has cooled over the past month, new tariff threats against Apple and the European Union raise the specter of a reescalation that could push the U.S. economy into recession. Higher iPhone prices due to tariffs, coupled with an economic slowdown, would be a double whammy for Apple.
Apple's iPhone business is already struggling to grow. Total iPhone revenue for the six months ending on March 29 was essentially flat year over year. The affordable $599 iPhone 16e was launched in February and likely helped drive iPhone upgrades, but that model will become much less affordable if tariffs are imposed.
Part of the problem for Apple is that iPhone users don't have much reason to upgrade. Apple Intelligence, the company's stab at artificial intelligence (AI)-powered features, hasn't moved the needle so far, and the most exciting features have been delayed. A revamped version of Siri may not come until 2026 as the company struggles to make it work reliably. When it does arrive, it's hard to say whether it will be enticing enough to compel iPhone users to upgrade, particularly if tariffs have pushed prices up.
$20 billion could disappear
With Alphabet losing against the U.S. Department of Justice in multiple antitrust cases, the writing may be on the wall for Apple's lucrative deal with the search giant. Apple receives around $20 billion annually from Google to make Google the default search engine on its devices.