No matter what President Trump keeps insisting, his upcoming tariffs on all Apple products will be paid for either by the company or by Americans who buy iPhones, iPads and Macs.
A market-analysis firm warns that If Apple chooses to pass the cost of these import taxes onto its customers, sales of iPhone could drop 20%.
Trump vs. China, with Apple caught ion the middle
Trump announced a fourth round of tariffs yesterday, with 10% import taxes going on billion of dollars more goods, including nearly everything Apple makes.
The iPhone maker has the option to absorb the cost of these taxes, which will obviously affect its profitability. Or it could raise the cost of its products, but analysts warn that will reduce demand.
Wedbush said in a note to investors this morning:
“We ultimately believe if fully absorbed this tariff would negatively impact FY20 EPS by roughly 4% and be a clear overhang on numbers. If Apple passes through the 10% tariff to consumers we could see a hit to iPhone demand by roughly 6 million to 8 million iPhones in the US based on our analysis over the next 12 months based on our overall unit forecast of 185 million iPhones globally for FY20.”
Comments from Bank of America Merrill Lynch were equally bleak:
“Our back of the envelope math suggests the impact (of the new tariffs) will be roughly $0.50-$0.75 (annualized per share) hit to earnings with roughly $0.30-$0.50 from iPhones.”
These analysts went on to predict that if Apple raises the cost of iPhones 10% to offset the new taxes then demand will drop by about 10 million units, roughly 20%.