A US$2,300 Apple iPhone? Trump tariffs could make that happen in the U.S.

The Apple iPhone 16 is on display at the Apple Fifth Avenue store, Friday, Sept. 20, 2024, in New York. (AP Photo/Pamela Smith)

Your favourite iPhone could soon become much pricier, thanks to tariffs.

U.S. President Donald Trump imposed a series of sweeping tariffs on countries around the world that could drastically alter the landscape of global trade, and consumer goods like iPhones could be among the hardest hit, analysts said on Thursday, with increases of 30% to 40% if the company were to pass on the cost to consumers.

Most iPhones are still made in China, which was hit with a 54% tariff. If those levies persist, Apple has a tough choice: absorb the extra expense or pass it on to customers.

Shares of the company were down more than 8% in the wake of the tariff announcements, putting them on track for their worst day since September 2020.

Apple sells more than 220 million iPhones a year; its biggest markets include the United States, China and Europe.

The cheapest iPhone 16 model was launched in the U.S. with a sticker price of US$799, but could cost as much as $1,142, per calculations based on projections from analysts at Rosenblatt Securities, who say the cost could rise by 43% - if Apple is able to pass that on to consumers. A more expensive iPhone 16 Pro Max, with a 6.9-inch display and 1 terabyte of storage, which currently retails at $1599, could cost nearly $2300 if a 43% increase were to pass to consumers.

Trump imposed tariffs on a wide range of Chinese imports in his first term as president to pressure U.S. companies to bring manufacturing either back to the United States or to nearby countries such as Mexico, but Apple secured exemptions or waivers for several products. This time, he has not yet granted any exemptions.

“This whole China tariff thing is playing out right now completely contrary to our expectation that American icon Apple would be kid-gloved, like last time,” Barton Crockett, analyst at Rosenblatt Securities, said in a note.

The iPhone 16e, launched in February as a cheaper entry point for Apple’s suite of artificial-intelligence features, costs $599. A 43% price hike could push that cost to $856. Prices of other Apple devices could jump as well.

Apple did not immediately respond to a request for comment. Many customers pay for their phones over a period of two or three years through contracts with their cellular providers.

However, other analysts noted that iPhone sales have been floundering in the company’s major markets, as Apple Intelligence, a suite of features that helps summarize notifications, rewrite emails and give users access to ChatGPT, has failed to enthuse buyers.

Expert reviews have suggested that the features, while innovative, do not provide enough of a compelling reason to justify upgrading to newer models.

The stagnation in demand could put additional pressure on Apple’s bottom line, especially if costs rise due to tariffs.

Angelo Zino, equity analyst at CFRA Research, said the company will have a tough time passing on more than 5% to 10% of the cost to consumers.

“We expect Apple to hold off on any major increases on phones until this fall when its iPhone 17 is set to launch, as it is typically how it handles planned price hikes.”

Even with some production moving to Vietnam and India, most iPhones are still made in China, and those countries were not spared from tariffs either, with Vietnam getting a 46% levy and India’s coming in at 26%.

Apple would need to raise its prices by at least 30% on average to offset import duties, according to Counterpoint Research co-founder Neil Shah.

A potentially sharp price hike could dampen demand for the smartphone and give South Korea’s Samsung Electronics 005930.KS an edge, as the Asian country faces lower tariffs than China, where all iPhones sold in the U.S. are made.

“Our quick math on Trump’s tariff Liberation Day suggests this could blow up Apple, potentially costing the company up to $40 billion,” Rosenblatt Securities’ Crockett noted, adding that negotiations between Apple, China and the White House are likely.

“It’s hard for us to imagine Trump blowing up an American icon...but this looks pretty tough.”

(Reporting by Akash Sriram in Bengaluru; Editing by Shinjini Ganguli)