President Donald Trump’s tariff announcement on Wednesday, which one analyst referred to as “worse than the worst-case” scenario, sent shockwaves across the technology industry.
Daniel Ives of Wedbush noted that Trump’s proposal to impose a 34% tax on Chinese imports was “the jaw dropper” of his address on Wednesday. According to reports, the upcoming levy will be in addition to the 20% tariff that was previously declared.
Concerns regarding Apple Inc.’s supply chain caused the company’s shares (AAPL) to be among the most severely impacted in the tech industry during Wednesday’s extended session. After-hours trading on Wednesday saw a 7.1% decline in shares. If that trend continues into Thursday’s regular session, Apple shares would have their largest one-day decline since they fell 8.0% on September 3, 2020.
Because of its jitteriness, the stock market tends to sell now and figure things out later. However, during Trump’s first presidency, Apple was spared from significant tariffs; the question now is whether the business can obtain comparable exemptions this time around.
Ives believes the IT behemoth will undoubtedly receive a similar clearance. “With its exposure to China, it’s a very nervous announcement for Apple,” Ives told MarketWatch. However, he believes that in the end, exclusions would be granted for iPhones and other Apple devices.
“Investors will sell the stock and ask questions later, but we saw it play out in Trump 1.0,” Ives stated.
If the tariffs do take effect, the size of Apple’s stock decline after hours appears to point to two inconvenient problems for the business. One is that, even though Apple has worked to diversify its supply chain over the years, this isn’t as beneficial now that Trump intends to slap widespread tariffs. For example, Trump placed a 46% duty on goods made in Vietnam, despite Apple expanding its production there. The second problem is that it might be harder for Apple to raise customer prices in this economic climate without negatively impacting its profits.
The hammering on the stock, on the other hand, can be excessive.
Angelo Zino, a technology analyst at CFRA with a buy rating on Apple stock, stated, “Even without an exemption, things may not be as bad.” “Over the last six years, Apple has expanded its gross margins from about 38% to 47%, which gives them a bit of leeway if they have to take a hit on tariffs.”
As an alternative, Apple can distribute the expenses throughout its supplier chain. However, Apple will rely on high retention rates due to its brand and a thriving ecosystem, which is made possible by the range of services it offers, even if customers feel the price. They account for roughly 21% of its overall net sales.
“For now, the White House will say they are not looking for deals… but we continue to believe there are offramps and major negotiations that will happen over the coming months with various countries and companies to navigate this new world of tariffs,” Ives stated.
When BourseWatch asked Apple for comment after Trump’s announcement, the company did not immediately reply. In response to a question concerning the effects of tariffs on Apple’s most recent earnings call in January, CEO Tim Cook stated that he and his team were “monitoring the situation and don’t have anything more to add than that.”
Zino is certain that Apple’s executive staff will handle the matter well. “We trust the management execution at Apple better than we do others across the tech ecosystem.”
