Apple’s CEO Tim Cook cautioned shareholders that, barring any new tariffs being implemented, the firm anticipates that Trump’s tariffs will raise its expenses by $900 million during the second quarter, which concludes in June.
Apple has traditionally depended on Chinese manufacturers for iPhone production. Although Trump has exempted smartphones from his additional 125% tariff on Chinese goods, these devices are still subject to a 20% duty. However, there is some positive news for consumers, as Cook informed CNBC that Apple is already obtaining more than half of its US iPhones from factories in India, which has largely avoided most of Trump’s retaliatory tariffs. Thus, iPhones imported from India only incur a 10% import fee.
“For the June quarter, we anticipate that the majority of iPhones sold in the US will originate from India,” Cook mentioned during a Thursday earnings call. Most iPads, Macs, and Apple Watch units available in the US will also be produced in Vietnam. “China will continue to be the source for the vast majority of total product sales outside the US,” Cook added.
Nonetheless, Apple predicts it will incur $900 million in import duties in the June quarter because it still procures some inventory from Chinese manufacturers. Cook pointed out that Trump’s cumulative 145% tariff on other Chinese imports can affect certain Apple accessories and repair components manufactured in China.
While the $900 million estimate is significant, Apple reported $95.4 billion in revenue during the first quarter. Still, Cook indicated that the Trump administration is considering imposing further duties on Chinese-manufactured smartphones and computers as part of its semiconductor-focused tariffs.
Currently, Cook stated he had no updates regarding potential price increases. He also noted that Apple experienced “limited impact” from the tariffs at the end of March’s first quarter since the company managed to “optimize” its supply chain, suggesting that it rerouted more orders from India.
“For the June quarter, we are unable to provide an exact estimate of the tariff impact, as we are uncertain about possible future actions before the end of the quarter,” Cook informed the attendees.
“However, to provide some clarity, assuming that the current global tariff rates, policies, and their applications remain unchanged for the remainder of the quarter and no new tariffs are introduced, we estimate that the impact will add $900 million to our costs,” he continued.
The president has implemented a 145 percent tariff on China, where the majority of Apple’s products are manufactured. Nonetheless, Trump has partially exempted electronic devices such as smartphones and computers from the new reciprocal import duty.
Democrats have raised questions about the reasoning behind this decision, which would cause certain sector-specific companies to incur higher costs than others.
Despite the potential increase in expenses, Cook asserted that Apple possesses “certain unique factors” that will be advantageous in the June quarter. The industry leader has been seen with Trump on multiple occasions since his November victory and was seated closely behind him during the inauguration.
Regardless of the growing relationship between Cook and the president and the exemption of Apple’s products from tariffs, Trump remarked that no one would be “off the hook” from the tariffs.
“These products will face the existing 20 percent Fentanyl Tariffs, and they are simply being reassigned to a different Tariff ‘bucket,’” the president wrote in a post on Truth Social.
“We are reviewing Semiconductors and the ENTIRE ELECTRONICS SUPPLY CHAIN in the upcoming National Security Tariff Investigations,” he added.
Cook stated that the company would continue to be a leading competitor, regardless of what may arise in the markets.
“For our part, we will manage the company as we always have, making careful and considered decisions while focusing on long-term investments, and remaining committed to innovation and the opportunities it brings,” Cook said during Thursday’s call.
“As we look to the future, we remain assured. Assured that we will keep producing the world’s best products and services. Assured in our capacity to innovate and enhance our users’ experiences. And assured that we can continue to operate our business in a manner that has always distinguished Apple.”
Cook also used the call to provide additional insights into the company’s earlier announcement about a $500 billion investment in the USA. He mentioned that the construction of servers in Texas will involve a manufacturing partner and that the $500 billion amount encompasses both capital and operational expenses.
This expenditure will also include investments in datacenters, which Cook verified will involve Apple constructing some facilities and leasing space in others. The company intends to adopt a similar approach for foundational AI models, creating some internally while seeking partners for others.
When asked about Apple’s performance in China—the source of 17 percent of the company’s revenue—Cook shared “positive nuggets,” revealing that the iPhone and iPad rank among the top two models purchased in urban China, while the Mac, iPad, and Watch are drawing a significant number of new customers to those products.
However, investors were not excited about these results, leading to a 4 percent drop in Apple’s stock during after-hours trading.
Apple’s shares declined on Thursday as the company disclosed an anticipated $900 million hit from tariffs for the ongoing quarter. When analysts inquired about potential tariff effects beyond its June quarter, CEO Tim Cook refrained from making predictions, stating he didn’t want to “predict the future.”
For its fiscal second quarter ending March 29, Apple reported results that surpassed expectations for both revenue and profit owing to better-than-expected iPhone sales.
Apple posted earnings per share (EPS) of $1.65 on revenues of $95.4 billion. Wall Street had anticipated an EPS of $1.62 and revenue of $94.2 billion, according to Bloomberg consensus estimates. The company also approved an additional $100 billion in stock buybacks.
The company’s tariff warning appears as consumer tech firms are grappling with Trump’s 145% tariff on imports from China. Nevertheless, Apple’s iPhones, iPads, and other computers are exempt from these duties. The company stated it is sourcing most of its iPhones intended for the U.S. from India.
Following the earnings call, Apple shares fell by more than 4%.
In its fiscal second quarter, Apple recorded $16 billion in revenue from the Greater China region, slightly below the analysts’ projection of $16.8 billion.
Apple’s iPhone revenue reached $46.8 billion, exceeding expectations of $45.6 billion and higher than the $45.9 billion reported in the same quarter last year.
Revenue from Mac and iPad amounted to $7.9 billion and $6.4 billion, respectively, surpassing analysts’ predictions of $7.7 billion in Mac sales and $6.1 billion in iPad sales. Additionally, Apple’s services revenue totaled $26.6 billion, just shy of the expected $26.7 billion.
In line with its strategy, Cook mentioned that the “majority” of iPhones sold in the U.S. during this quarter would be sourced from India, while “almost all” iPad, Mac, Apple Watch, and AirPods products would come from Vietnam. Most of the product sales outside of the U.S. will list China as their country of origin.
Regarding future production, Cook remarked, “I wouldn’t want to predict the mix of production in the future.”
Tariffs currently affecting Apple are determined by a product’s country of origin, and the company indicated that most of its products are not yet impacted by the reciprocal tariffs announced in April.
The White House is presently devising a plan for duties on semiconductors, which could extend to smartphones and computers as well.
When asked if consumers were trying to get ahead of potential price hikes linked to tariffs, Cook informed analysts, “we don’t believe that we saw obvious evidence of a significant pull forward in demand in the March quarter due to tariffs.”