Apple states it could incur a $900 million loss this quarter due to U.S. trade tariffs announced by U.S. President Donald Trump, although the tech giant reported first-quarter profit above expectations on Thursday.
The tech giant cautioned that the increasing costs are linked to the shift of its iPhone production from China to India. Chief executive Tim Cook mentioned that the majority of iPhones sold in the U.S. will soon be manufactured in India, but this transition comes with higher expenses due to trade tensions.
Cook stated during an earnings call that he anticipates “a majority of iPhones sold in the U.S. will have India as their country of origin,” adding that Apple’s products were currently exempt from Trump’s most severe reciprocal tariffs.
“We are not able to precisely estimate the impact of tariffs, as we are uncertain of potential future actions prior to the end of the quarter,” Cook said.
“Assuming the current global tariff rates, policies and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add $900 million to our costs.”
Tit-for-tat exchanges have resulted in substantial U.S. levies on China, with Beijing establishing retaliatory barriers on U.S. imports.
High-end tech goods such as smartphones, semiconductors, and computers received a temporary reprieve from U.S. tariffs.
“Apple proactively built up inventory ahead of anticipated tariff policies,” noted Canalys research manager Le Xuan Chiew. “With ongoing fluctuations in reciprocal tariff policies, Apple is likely to further shift U.S.-bound production to India to reduce exposure to future risks.”
While iPhones produced in mainland China still constitute the majority of U.S. shipments, production in India increased toward the end of the quarter, according to Canalys.
Cook indicated that Vietnam would be the country of origin for almost all iPad, Mac, Apple Watch, and AirPod products sold in the U.S.
He insisted that China will remain the primary location for manufacturing most Apple products intended for sale outside the U.S.
Apple’s revenue of $95.4 billion in the recently concluded quarter was driven by iPhone sales, with the company generating $17 billion in the China market, according to the earnings report. The profit for the quarter was $24.8 billion.
Apple shares experienced a decline of more than 3 percent in after-market trading.
“The real story is in Tim Cook’s plans to navigate these unprecedented trade challenges,” commented Emarketer analyst Jacob Bourne.
Apple’s strategy to move manufacturing to India “raises pressing questions about execution timeline, capacity limitations, and potentially unavoidable cost increases that will shrink margins, be passed to consumers, or have a mix of consequences,” Bourne added.
