Apple cautioned that US tariffs could cost the company money and were causing supply chain disruptions despite reporting first-quarter profits that were higher than anticipated on Thursday.
Apple expects US tariffs to cost $900 million in the current quarter, even though their impact was “limited” at the start of this year, chief executive Tim Cook said on an earnings call.
Cook said he expected “a majority of iPhones sold in the US will have India as their country of origin,” adding that Apple’s products were exempt from Trump’s most severe reciprocal tariffs for now.
“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,” Cook said.
“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.”
High-end electronic products like computers, semiconductors, and cellphones were temporarily exempt from US tariffs.
According to independent tech expert Rob Enderle, not all parts that go into Apple devices are immune from Trump’s tariffs, even though finished handsets are currently free.
“The more components are crossing borders, the most cost flows through to the device,” Enderle explained.
“In the end, this all adds up to an expensive mess,” he said of the tariff situation.
Canalys research manager Le Xuan Chiew said Apple built up inventory ahead of the tariffs going into effect.
“With ongoing fluctuations in reciprocal tariff policies, Apple is likely to further shift US-bound production to India to reduce exposure to future risks,” he said.
According to Canalys, production in India increased at the end of the quarter, even though mainland China still produces the majority of iPhone shipments to the US.
According to Cook, practically all iPad, Mac, Apple Watch, and AirPods sold in the US will be made in Vietnam.
He emphasized that the majority of Apple products sold outside of the US will still be produced in China.
“What we learned some time ago was that having everything in one location had too much risk with it and so we have, over time with certain parts of the supply chain, opened up new sources of supply,” Cook told analysts.
“You could see that kind of thing continuing in the future.”
