Apple CEO Tim Cook said Thursday that he expects the tariffs imposed by President Donald Trump to add at least $900 million to the company’s costs during the current quarter, which ends in June.
Speaking with investors after the company announced its quarterly earnings results, Cook also said Apple will assemble most of the products it sells in the United States outside of China this quarter to avoid the tariffs fueling an ongoing trade war between the two countries.
Apple tariff costs: $900 million in one quarter
In March, Trump slapped all major manufacturing countries with heavy import tariffs in a bid to reshape international trade. Currently, the tariff on Chinese imports to the United States stands at 145%. However, this rate doesn’t apply to iPhones, Macs and other computers.
During Thursday’s conference call with investors, Cook explained the situation.
“If you look at the categories of tariffs that are applicable to us today for the June quarter, most of our tariff exposure relates to the February IEEPA-related tariff at the rate of 20%, which applies to imports to the U.S. for products that have China as their country of origin,” Cook said.
The Apple CEO went on to predict how much these import taxes will cost Apple in the April-through-June quarter.
“Currently, we are not able to precisely estimate the impact of tariffs as we are uncertain of potential future actions prior to the end of the quarter,” said Cook. “However, for some color, 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.”
Tariffs chaos makes it impossible to predict the future
As for projections beyond June, Cook flatly refused. He said, “This estimate should not be used to make projections for future quarters, as there are certain unique factors that benefit the June quarter.”
Much of the uncertainty comes from the White House. The president “invoked his authority under the International Emergency Economic Powers Act of 1977” (aka IEEPA) to set, raise or lower tariffs at any time. Whether import taxes on iPhone, Mac and other products will go up or down remains entirely at Trump’s discretion.
Cook also refused to comment on whether import taxes will force Apple to raise prices. When asked about the possibility during Thursday’s conference call, the executive said only, “We have nothing to announce today. I’ll just say that the operational team has done an incredible job around optimizing the supply chain of the inventory, and we’ll obviously continue to do those things to the degree that we can.”
Apple builds an increasing number of iPhones and Macs outside China
To avoid the import taxes Trump imposed on products imported into the United States from China, Apple plans to source them from other countries with lower tariffs.
“For the June quarter, we do expect the majority of iPhones sold in the U.S. will have India as their country of origin, and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch and AirPods,” Cook told analysts Thursday.
Apple started turning to India for iPhone production several years ago. Now the U.S./China trade war clearly seems to be accelerating that trend.
Apple will continue to assemble iPhones and other products in China to sell in markets outside the United States.
Cook stays ‘confident’ for Apple’s future
When talking about the impact of the Trump tariffs on Apple, Cook said the company will stay the course.
“For our part, we will manage the company the way we always have, with thoughtful and deliberate decisions, with a focus on investing for the long term and with dedication to innovation and the possibilities it creates,” Cook said. “As we look ahead, we remain confident, confident that we will continue to build the world’s best products and services, confident in our ability to innovate and enrich our users lives, and confident that we can continue to run our business in a way that has always set Apple apart.”
Ed Hardy has been writing full-time about tech for 25 years, and using it for much longer than that. His intro to Apple was a Macintosh Classic II (which he still has), but now he uses a 13-inch iPad Pro as his primary computer. He’s written for NotebookReview, TabletPCReview, and Brighthand, as well as other sites.
