Apple's $900 Million Tariff Hit Shifts US IPhone Supply To India

Apple Faces $900 Million Tariff Hit, Shifts iPhone Production to India

By Glenn Chapman
San Francisco (AFP) May 2, 2025

Apple reported a first-quarter profit above expectations but warned that US tariffs could cost the company and disrupt its supply chain. CEO Tim Cook said the company expects US tariffs to cost $900 million in the current quarter, despite their impact being "limited" at the start of the year.

Cook stated that "a majority of iPhones sold in the US will have India as their country of origin," and Apple’s products are exempt from Trump’s most severe reciprocal tariffs for now. However, Cook noted that the company is unable to precisely estimate the impact of tariffs due to uncertainty about potential future actions.

"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," Cook said.

Tit-for-tat exchanges have seen hefty US levies imposed on China, with Beijing setting retaliatory barriers on US imports. High-end tech goods such as smartphones, semiconductors, and computers received a temporary reprieve from US tariffs.

Although completed smartphones are exempted from Trump’s tariffs for now, not all components that go into Apple devices are spared, according to independent tech analyst Rob Enderle. "The more components are crossing borders, the more cost flows through to the device," he explained.

Canalys research manager Le Xuan Chiew said Apple built up inventory ahead of the tariffs going into effect. "With ongoing fluctuations in reciprocal tariff policies, Apple is likely to further shift US-bound production to India to reduce exposure to future risks," he said.

While iPhones produced in mainland China still account for the majority of US shipments, production in India ramped up toward the end of the quarter, according to Canalys. Cook said Vietnam would be the country of origin for almost all iPad, Mac, Apple Watch, and AirPod products sold in the US. China will continue to be where most Apple products are made for sale outside the US.

"Having everything in one location had too much risk with it, and so we have, over time, opened up new sources of supply," Cook told analysts. "You could see that kind of thing continuing in the future."

Sales Slip in China

Apple’s revenue of $95.4 billion in the recently ended quarter was driven by iPhone sales, with the company reporting $24.8 billion profit for the quarter. "Apple saw strong growth in the Americas and Japan," said CFRA Research equity analyst Angelo Zino, noting part of the reason could have been ramped-up orders to get ahead of US tariffs.

"China revenue declined 3 percent, but the hope was for growth as subsidies were put in place to help stimulate demand in the region," Zino said.

Apple shares were down more than three percent in after-market trading. "The real story is in Tim Cook’s plans to navigate these unprecedented trade challenges," said Emarketer analyst Jacob Bourne. "Apple’s plan to shift 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.

Related Links