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Market observers are focused on Apple as it gears up to announce its fiscal year’s second-quarter financial results on Thursday. The tech behemoth has been endeavoring to assuage anxious analysts following Donald Trump’s imposition of wide-ranging tariffs on various nations, which are expected to complicate supply chains for consumer electronics. Apple’s shares have decreased by 16% since the year’s commencement.
The Second-Quarter Expectations
In the lead-up to its earnings release, the company’s stock experienced a modest uptick on Wednesday. Experts anticipate a robust quarter for Apple, with an average revenue projection of $94.56bn, reflecting a 4.2% year-over-year increase, and earnings per share estimated at $1.62, up 5.8%. The $2.3tn tech conglomerate has surpassed Wall Street’s expectations for the past four quarters.
The Impact of Trade Tensions
Apple heavily depends on Chinese manufacturing for its smartphones, tablets, and notebooks. Days after Trump introduced steep tariffs on China, peaking at 245% at one point, the president stated he would grant an exception for consumer electronics.
Executive Communications
Apple CEO Tim Cook engaged in discussions with high-ranking White House officials around the same time, according to the Washington Post. Following these conversations, Trump declared an exception for consumer electronics. Apple’s stock surged by 7% in the days after the declaration.
The Uncertainty of Tariff Reprieves
However, the longevity of this relief remains unclear. US commerce secretary Howard Lutnick has described the exemption as “temporary,” and even Trump later remarked on social media that no “exception” had been made.
The president has consistently advocated for increased manufacturing within the US. In February, he conferred with Cook regarding investments in domestic manufacturing. “He’s going to start building,” Trump said post-meeting. “Very big numbers – you have to speak to him. I assume they’re going to announce it at some point.”
Relocation and Financial Implications
- JP Morgan projects that Apple’s costs could escalate significantly if it shifts production to the US, suggesting a potential 30% price hike in the short term, assuming a 20% tariff on Chinese imports.
- JP Morgan and other analysts propose that Apple could continue to transfer more of its manufacturing to India, which faces a 10% tariff.
Strategic Moves Amid Tariff Concerns
Apple chartered aircraft to transport approximately $2bn worth of iPhones from India to the US earlier this month. This move aims to bolster inventory in anticipation of price increases stemming from Trump’s tariffs and panic-buying by concerned consumers. This development follows investors’ apprehension about declining iPhone sales in China, the world’s largest smartphone market. In its January earnings report, Apple disclosed an 11.1% drop in iPhone sales in China during the first quarter, below Wall Street’s iPhone revenue expectations.
The Short-Term Impact and Long-Term Concerns
In the near term, analysts suggest that the tariff ambiguity could work in Apple’s favor, prompting consumers to stockpile its products due to fears of impending price increases.“The long-term question is how much of any increased cost will be passed on to consumers,” noted Dipanjan Chatterjee, principal analyst for Forrester.