Apple Faces $1.1B Tariff Costs Next Quarter

Apple Faces Increasing Tariff Costs

Tariffs are anticipated to result in $1.1 billion in expenses for Apple during the July-to-September quarter. This represents an increase compared to the preceding financial period, as stated by CEO Tim Cook during the company's investor earnings conference call.

Tariff Projections and Previous Costs

These cost forecasts are based on existing tariff rates and policies, but may ultimately be lower than initially projected, mirroring the outcome of the previous quarter. Apple experienced approximately $800 million in tariff-related costs for the June quarter, which was less than the $900 million estimate provided in May.

The Impact of IEEPA and Trade Agreements

Cook explained that the majority of the tariffs impacting Apple originate from the International Emergency Economic Powers Act (IEEPA). Earlier this year, the U.S. government and China reached an agreement establishing a 30% tariff on imports from China.

This trade agreement lowered "reciprocal" tariffs from 125% to 10% (in addition to the existing 20% duty against China concerning fentanyl), and remains in effect until August 12.

Sales Growth and Product Strength

Although sales growth indicates that concerns about tariffs may have encouraged purchases, Cook minimized the “pull forward” effect. He emphasized that consumers were primarily driven by the “strength of the product.”

“The iPhone 16 family experienced double-digit growth when compared to the iPhone 15 family from the year-ago quarter,” Cook noted during the call. “We also achieved a record number of upgrades, which I believe is a direct result of the product’s appeal.”

iPhone Sales and Overall Revenue

iPhone sales increased by 13% year-over-year, generating $44.5 billion in revenue. This figure accounts for nearly half of the company’s total revenue for the quarter, which reached $94 billion.

Ongoing Tariff Effects and Manufacturing Shifts

Despite this success, tariffs continue to have an impact and may persist, even as Apple adjusts its manufacturing strategy to prioritize countries with lower tariff rates.

Global Manufacturing Locations

Apple’s devices are primarily manufactured in India, China, and Vietnam. Approximately half of the iPhones sold in the U.S. are produced in India, while Macs, iPads, and watches destined for U.S. customers are manufactured in Vietnam.

Both India and Vietnam are subject to tariffs of 25% and 20%, respectively.

Political Pressure and U.S. Investment

President Trump previously voiced his disapproval of Apple’s increasing focus on India for its supply chain, threatening the company with a 25% tariff unless iPhone production was relocated to the U.S.

Cook reaffirmed Apple’s dedication to the U.S. during Thursday’s investor call, stating that the company is committed to investing $500 billion in the U.S. over the next four years, focusing on the development of chips and semiconductors nationwide.