Apple Tariff Risk Grows: Analysts Say US iPhone Production Is a ‘Fairy Tale’

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Apple Tariff Risk Grows: Analysts Say US iPhone Production Is a ‘Fairy Tale’

Apple (NASDAQ:) stock was trending about 3% lower on Friday as investors got jittery about new tariff threats from President Donald Trump on the iPhone maker.

It started when news broke this week that Apple was planning to build a 300-acre, $1.5 billion iPhone manufacturing plant in India, as it plans to move more production out of China.

On his trip to the Middle East last week, Trump met with Apple CEO Tim Cook and later said he didn’t want Apple building a manufacturing plant in India, according to the Times of India. That statement got stronger on Friday after the new $1,5 billion plant in India was reported by various news outlets.

Trump took to Truth Social on Friday morning, posting that he “long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S.”

Back in February, Apple announced that it was investing $500 billion in U.S. operations, including a server plant in Houston.

“We are bullish on the future of American innovation, and we’re proud to build on our long-standing U.S. investments with this $500 billion commitment to our country’s future,” Cook said at the time. “From doubling our Advanced Manufacturing Fund, to building advanced technology in Texas, we’re thrilled to expand our support for American manufacturing.”

Wedbush analyst Dan Ives, however, said back in April that it would take Apple at least three years to ramp up manufacturing in the U.S. an then it would only be about 10% of U.S. iPhone production.

On Friday, Ives reiterated that notion. According to CNN, Ives said “the concept of Apple producing iPhones in the US is a fairy tale that is not feasible.” Ives told CNN that it would take five to 10 years to move all of Apple’s iPhone production to the United States. Ives also said iPhone would triple in price if made in the U.S., because of the costs of replicating the complex manufacturing process that already exists in Asia.

“We see no chance that iPhone production starts to happen in the US in the near-term given the upside-down cost model and Herculean-like supply chain logistics needed for such an initiative,” Ives wrote in a research note on Friday, reported Barron’s.

The Barron’s article suggested that even a 25% tariff would be cheaper than building manufacturing plants in the U.S.

On the earnings call for the fiscal second quarter — the March quarter – Cook said “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 products sold in the US.”

It is not clear where this goes from here, and if it even materializes. But if it does, UBS analyst David Vogt said a 25% tariff would be a “modest headwind” for Apple, reported CNBC. Vogt said it would drop Apple’s annual earnings expectations by about 51 cents per share, compared to the 34 cents per share drop with the current tariffs in place.

Apple investors should watch this closely, as new developments may arise.

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