Apple (AAPL) CEO Tim Cook has been friendlier with President Trump than most big-company executives — communicating regularly, donating to his inauguration, and refraining from criticizing protectionist policies Cook probably detests. Some analysts say Cook has conducted a "master class" in managing the mercurial president.
Yet Apple is in Trump's crosshairs anyway. After months of complaining about Apple building iPhones overseas, Trump finally threatened a 25% tariff on iPhones unless Apple makes them in the United States. Apple's stock sank 3% on the news and is down 22% for the year — a rare underperformance by a tech darling that has been all but unstoppable for two decades.
Cook may yet devise a way to escape Trump's favorite form of economic punishment. But for now, Apple and its iconic phone are fat targets for Trump, who is increasingly using tariffs to micromanage the economy and dictate how CEOs should run their businesses.
The Trump trade war circa 2025 clearly echoes the tariffs he imposed during his first term. But there are some important differences. The first time around, Trump used laborious processes to impose tariffs based on concerns about national security and fair-trade violations. That took a long time and limited the shock-and-awe effect Trump prefers.
During his second term, Trump is basing most of his tariffs on the premise that trade deficits constitute a "national emergency." That's a novel approach that lets Trump impose tariffs simply by issuing executive orders. Several lawsuits are challenging Trump's ability to do this, but unless courts intervene, the new approach allows Trump to fine-tune his tariffs to focus on specific sectors, specific companies, or even specific products — such as the iPhone.
Nobody really knows why Trump is so fixated on manufacturing, which has gradually declined in all advanced economies and now represents just 10% of US economic output. Services account for nearly 80% of the US economy, and that's where most of the jobs of the future lie.
Yet Trump's entire trade agenda fixates on products rather than services, and Apple makes one of the world's most recognizable products. That alone may explain Trump's fixation with the iPhone. Apple, in fact, is unusual among tech giants in that its main offering is actually a physical product rather than software packaged as a service. That makes Apple more vulnerable to Trump's trade peccadilloes than Facebook, Google, or Amazon, which mainly offer services with very little reliance on overseas manufacturing.
One thing Apple probably won't do in response to Trump's latest threat is move iPhone production to the United States. The company used to make its flagship product mostly in China and has since diversified to other nations such as India and Vietnam. That makes sense in one way: One big goal of Trump's trade war is to isolate China and permanently reduce US trade with the world's second-largest economy. Trump is less hostile toward India and Vietnam, so it's reasonable to think he'll impose fewer barriers on imports from those countries.
But there's no place to hide once Trump starts imposing tariffs on a product-by-product basis. Even with a 25% tariff, it makes no sense to move iPhone production to the United States, where sharply higher costs could raise the price of an iPhone from $1,000 now to more than $3,000. Apple would have to build completely new supply chains and find workers in a manufacturing economy already facing a shortage of workers with the right skills.
That leaves Apple three options. It could simply bear the 25% tariff and then figure out how much of the added cost it can pass on to retail customers. Virtually no smartphones are made in the United States, so if Trump hits the iPhone with a 25% tariff, maybe he'll apply that to competing products as well. If all smartphones came with a 25% tariff, Apple would be less disadvantaged and might be able to pass much of the cost onto consumers.
Cook might still be able to work some kind of deal with Trump that involves other types of domestic spending that would satisfy Trump. When Apple "announced" a massive $500 billion domestic investment in February, it was partly rolling up projects already in the works to give Trump something to brag about, which he did. It's well understood by now that Trump sometimes makes threats as leverage to get deals he can take credit for. Cook may yet be clever enough to out-Trump Trump.
You're doing what to us? Apple CEO Tim Cook speaks as he and President Trump participate in an American Workforce Policy Advisory Board meeting in the White House on March 6, 2019. (Reuters/Leah Millis/File Photo) ·REUTERS / Reuters
Apple could also seek a legal remedy — or wait for one to materialize. At least seven lawsuits are underway challenging Trump's ability to claim a "national emergency" as justification for imposing tariffs, and the iPhone threat underscores how tenuous that justification may be. If Trump does impose tariffs on iPhones, it would be under this emergency authority. What, exactly, is the emergency? iPhones are too cheap? They need to be made in America in case the US goes to war with China?
Some legal analysts think there's a good chance the courts will issue some sort of injunction against Trump's tariffs, with the Supreme Court likely to resolve the matter. If the courts completely blocked Trump's tariff authority under the emergency approach, Trump could still levy tariffs using the slower, more tedious methods he did in 2018 and 2019.
That, however, would be an important reprieve for Apple and thousands of other businesses trying to figure out how to deal with the rising costs and other disruptions Trump's tariffs are causing. They could stockpile inventories and use the delay to develop new ways to tariff-proof their operations. Trump has power over Apple and other big companies, but they have options too.
A battle of titans is underway.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
