Profitability Expected to Decline If Tariffs Are Imposed... Down 3.4%
"Overcoming Possible by Improving Supply Chain Outside of China"
Apple, the largest company by market capitalization in the U.S. stock market, saw its stock price plunge due to concerns over a 'tariff war.' Wall Street analysts believe that Apple can protect its profitability by diversifying its supply chain beyond China.
On the 3rd (local time), Apple’s stock closed at $228.01 (332,410 KRW) on the New York Stock Exchange, down 3.39% from the previous day. Among big tech companies, except Tesla (-5.17%), this was the largest drop.
This decline in Apple’s stock appears to be driven by fears that the tariff policies of the Donald Trump administration will trigger an all-out tariff war. In particular, President Trump signed an executive order on the 1st imposing tariffs of 25% each on Canada and Mexico, and 10% on China. For Apple, which produces most of its iPhones?accounting for half of its sales?in China, additional tariffs on Chinese imports could lead to higher iPhone prices, negatively impacting future profits.
CNBC reported, "(The stock price drop) shows how vulnerable Apple can be to rising import costs," adding, "Apple has expanded its supply chain to countries like Vietnam, Malaysia, and India, but still remains highly dependent on China."
Barton Crockett, a researcher at Rosenblatt Securities, said, "It was unexpected that Apple would be included in the China tariffs," and added, "Apple is likely to pass price increases on to consumers, but this could anger Trump."
During Trump’s first term, Apple requested exemptions from tariffs, and some products were accepted, but it is unclear whether the same will happen this time.
Wall Street analysts suggest that Apple needs to reduce its dependence on China to maintain profitability amid the tariff war. Warmji Mohan, a researcher at Bank of America (BoA), said, "Assuming Apple still sources 50% of the products sold in the U.S. from China and does not raise prices, annual earnings per share would decrease by $0.12," and "If additional tariffs are imposed on Chinese imports, Apple could increase production in India and supply to the U.S. This approach could also be applied to Apple products manufactured in other countries such as Vietnam and Malaysia."
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