Photo credit: Apple
Apple’s iPhone faces a new reality, one where its price tag could climb higher than ever before in the U.S., as President Donald Trump’s announcement today dropped a stark challenge: build iPhones in America or face a 25% tariff on devices made abroad.
Moving iPhone production to the U.S. is a logistical nightmare since Apple’s manufacturing is deeply rooted in China, with smaller hubs in India and Vietnam. This would means spending billions in new factories, retraining workers, while also navigating higher labor costs. Analyst Ming-Chi Kuo of TF International Securities argues it’s a nonstarter. “In terms of profitability, it’s way better for Apple to take the hit of a 25% tariff on iPhones sold in the US market than to move iPhone assembly lines back to US,” he posted on X. The numbers don’t lie: making iPhones in the U.S. could jack up prices by as much as 90%, turning a $1,000 iPhone 16 Pro into a wallet-busting $3,500.
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What’s driving the crazy hike? U.S. labor costs are sky-high compared to China, where workers pocket about $592 a month, while American wages hit $60,843 a year. Add to that the complexity of sourcing parts domestically—many components, like chips from Taiwan’s TSMC, would still face tariffs. Apple’s supply chain is a global web, optimized for efficiency and cost. Uprooting it isn’t like flipping a switch; it’s more like rebuilding a city from scratch.
Tim Cook, Apple’s CEO, has been vocal about the challenges. “What we learned some time ago, having everything in one location had too much risk with it,” he said during a recent earnings call, emphasizing Apple’s push to diversify production to places like India, where iPhone output jumped 60% to $22 billion last year. Yet Trump’s ultimatum undercuts this strategy, as even India faces a 26% tariff, and Vietnam a 46% one. Apple’s attempt to sidestep China’s 145% tariff by leaning on these countries now feels like a half-measure.
Consumers are caught in the crossfire. If Apple absorbs the 25% tariff, it could shave 8.5% to 9% off its gross margins, a hit that stings a company used to fat profits. Passing the cost to buyers, though, risks pricing out loyal fans. A UBS analyst estimated a $1,199 iPhone 16 Pro Max could climb to $1,549 with the tariff tacked on. That’s not pocket change, and with competitors like Samsung facing lower tariffs from South Korea, Apple’s market share could take a hit if prices soar too high.
Analysts are scrambling to predict Apple’s next move. Morgan Stanley suggests a clever workaround: push buyers toward higher-storage iPhone 17 Pro models, which carry 10% to 15% better margins. This could soften the tariff blow without blanket price hikes. But it’s a gamble—convincing customers to shell out more for storage they might not need requires slick marketing and a strong economy. Meanwhile, Apple’s stockpiling products to delay price increases, a tactic that buys time but won’t last forever.
The broader picture is grim for tech. Trump’s tariffs aren’t just an Apple problem—they’re a sledgehammer to global supply chains. Other companies, like Microsoft and Sony, have already jacked up prices: the Xbox Series X now costs $600, up from $500, and the PlayStation 5 Pro hit $700. Apple’s exemptions on some products, like chips from TSMC’s Arizona plant, offer a sliver of relief, but accessories and non-exempt items face the full tariff brunt.
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