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iPhone Prices Expected to Increase Significantly Due to Tariffs
Apple product prices, notably for the iPhone, are anticipated to rise sharply as a consequence of tariffs previously imposed by former President Donald Trump. These levies on goods imported from China threaten to make the already expensive iPhone considerably more costly for consumers.
Analyst Warns of Potential $3,500 iPhone Price Tag
Financial analysts at Wedbush Securities have cautioned that the widely used smartphones could reach a staggering $3,500 per device. Analyst Dan Ives highlighted that manufacturing in China is currently the only viable approach for Apple to maintain pricing at accessible levels.
This potential price escalation would place the iPhone in a similar price bracket to Apple’s Vision Pro headset, a device that experienced slow sales partly attributed to its substantial price.
Impact of Tariffs on iPhone Manufacturing
Former President Trump implemented a 54 percent tariff on all Chinese goods entering the US. A significant majority of iPhones are assembled in China, making them directly susceptible to these tariffs.
“For US consumers, the idea of a $1,000 iPhone, which is already considered a top-tier consumer product globally, could become a thing of the past,” Ives commented.
He further explained, “To illustrate, if consumers are prepared to pay $3,500 for an iPhone, production could potentially shift to states like New Jersey or Texas. However, the notion of manufacturing iPhones in the US at a price point close to $1,000 is, in our view, unrealistic.”
Apple previously announced a $500 billion investment in the US, aimed at mitigating price increases.
Nevertheless, Ives suggests that relocating even a fraction of the supply chain would be a significant undertaking. “It would take an estimated three years and $30 billion to move just 10 percent of its supply chain from Asia to the US, inevitably causing major disruptions,” he noted.
Global Trade Implications and Potential Retaliation
Trump’s administration initiated a series of broad tariffs affecting various countries, potentially reshaping the landscape of global trade. Consumer products such as iPhones are expected to be among the most severely affected.
“The concept of producing Apple products and iPhones in the US might sound appealing in principle, but practically, it remains a hypothetical scenario,” Ives stated in a recent communication. “If iPhones were manufactured in the US, prices would likely be two to three times higher due to factors such as US labor costs, the infrastructure required for tech manufacturing, the location of chip production in Asia, and the availability of skilled workforce and engineers.”
Ives acknowledged Apple’s capacity to produce certain products like high-end Macs and some hardware components in the US. However, he emphasized that “these tariffs, in their current form, pose a substantial barrier to US consumer sales or risk driving prices to unsustainable levels.”
iPhone Sales and Market Projections
Apple sells over 220 million iPhones annually, with the US, China, and Europe being its primary markets.
While the base model iPhone 16 is currently priced at $799, Ives’ analysis indicates that the forthcoming smartphone model could retail for more than double that price upon its release later this year.
During his first term, Trump imposed tariffs on a wide array of Chinese imports, aiming to incentivize US companies to relocate manufacturing to the US or neighboring countries. Apple previously secured exemptions for several products. However, according to Rosenblatt Securities analyst Barton Crockett, CEO Tim Cook has not yet been granted any exemptions this time. Crockett stated, “The current China tariff situation is unfolding contrary to previous expectations that Apple, an American icon, would receive preferential treatment.”
China’s Retaliatory Tariffs
China is anticipated to respond with retaliatory measures, including imposing an additional 34 percent tariff on all US imports.
Beijing announced the measure as a significant escalation in the ongoing trade tensions with the US, raising concerns about a potential recession and causing instability in global stock markets.
These new tariffs, effective April 10, match the 34 percent levy imposed by the US this week and are in addition to existing tariffs on US goods.
Trade Data and Export Controls
US exports to China totaled $143.5 billion last year, with key exports including oilseeds, grains, machinery, and aerospace products.
Conversely, US imports from China reached $438.9 billion, primarily consisting of electrical and electronic equipment, machinery, toys, and plastics.
China’s commerce ministry also announced increased export controls on rare earth elements, crucial materials in high-tech products such as computer chips and electric vehicle batteries, and added 11 entities to its “unreliable entity” list, enabling punitive actions against foreign entities. Furthermore, China has initiated a lawsuit with the World Trade Organization (WTO) regarding the sweeping US tariffs.
“For all imported goods originating from the US, an additional tariff of 34 percent will be applied on top of the existing tariff rate,” China’s Finance Ministry stated.
Beijing’s Commerce Ministry has also imposed export controls on seven rare earth elements to the US, effective April 4.
The Commerce Ministry stated the export controls were implemented “to better safeguard national security and interests, and to fulfill international obligations such as non-proliferation,” and confirmed that “China has filed a lawsuit under the WTO dispute settlement mechanism.”