Bloomberg says Apple may move iPhone manufacturing out of China if import tariffs hit 25%. The company is said to be sitting pat at the moment, but is keeping an eye on things, just in case. The report’s source is the traditional “people familiar with the company’s thinking.”
The tech giant’s suppliers intend to stick with the existing model even if the U.S. levies a 10 percent import tariff on smartphones, the people said, asking not to be identified talking about a private matter. But it will have to reassess the situation should U.S. President Donald Trump decide on a more punitive 25 percent, the people said.
It was initially believed that Apple wouldn’t be hit with import duties for its products manufactured in China. However, U.S. President Donald Trump last month indicated smartphones and laptops could be hit by the tariffs.
While President Trump believes a 10% tariff wouldn’t be a big deal for the company or its customers, saying, “people could stand that very easily.” However, economists, analysts, and Apple itself don’t agree with the president.
A 10-percent tariff could result in an earnings-per-share decline of just $1 for Apple, should all its hardware sold in the U.S. be subject to the levy and the company absorbs the cost, RBC analyst Amit Daryanani wrote in a Nov. 28 research note. That compares with the average 2019 Apple-EPS estimate of $13.32, according to data compiled by Bloomberg.
However, a more severe scenario of a 25 percent tariff — absorbed by Apple — could result in an EPS decline of about $2.50, he added.
The president has said he wants to reduce the trade deficit with China. While Apple does have some iPhones assembled outside of China, India comes to mind, moving production out of the country would be a massive task.