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If consumers would pay $3,500 for an iPhone, we could bring production to the US.

The iPhone with and Without Tariffs

The Wall Street Journal comments Here’s the iPhone. Here’s the iPhone With Tariffs.

Apple’s (AAPL) big moneymaker is a global patchwork. It has components sourced from all over the world, brought together primarily in China, where electronics manufacturing has been perfected over a generation.

Moving just the assembly process to the U.S.? Not cheap and definitely not easy.
Take a look at this iPhone 16 Pro. Your cost, for the 256GB version, is $1,100. The cost of all the hardware inside—aka the bill of materials—was about $550 to Apple when the phone was introduced, says Wayne Lam, research analyst at TechInsights, which breaks down major products. Throw in assembly and testing and Apple’s cost rises to around $580. Even when you account for Apple’s advertising budget and all the included services—iMessage, iCloud, etc.—there’s still a healthy profit margin.

Now factor in the newly announced tariff for goods from China, which currently totals 54%. The cost rises to around $850. That profit margin would shrink dramatically if Apple didn’t up the price. And you don’t become a trillion-dollar gadget company by charging for things at cost.

An Apple spokeswoman declined to comment on the company’s pricing plans or manufacturing details.

So what about that American-made iPhone? Wouldn’t it at least save on tariffs? Apple would still pay levies on the device’s many imported parts. Plus, a manufacturing move to the U.S. would be “a massive, mammoth undertaking” that would take years, says Barton Crockett, senior research analyst at brokerage firm Rosenblatt Securities.

And the phone itself would likely cost more—a lot more. The assembly ecosystem in China is labor intensive and wouldn’t make economic sense in the U.S., Crockett explains. “It’s not clear you can make a competitively priced smartphone here.”

Apple’s Costs

The above article looked at Apple’s costs which are about to surge.

Trump has threatened an additional 50 percent tariff, effective tomorrow, because China retaliated.

Apple’s Strategy

To avoid China tariffs, Apple Plans to Source More iPhones From India

Trump’s new tariff package raises levies on Chinese goods to at least 54% while imposing a 26% rate on Indian goods. On Monday, Trump threatened to add to China tariffs if the country doesn’t remove the retaliatory duties they announced after U.S. tariff plans were revealed on April 2.

The iPhone is Apple’s signature product and makes up about 50% of its revenue. The company’s heavy reliance on China for manufacturing has spooked investors concerned about its exposure to tariffs, leading to a 19% decline in its shares, their worst three-day performance in nearly 25 years.

The tariff on Chinese goods could add about $300 to the current $550 hardware cost to Apple of an iPhone 16 Pro that currently retails for $1,100, according to TechInsights. Apple could limit the damage by importing phones from India where the tariff is about half as high.

While Trump has called for a manufacturing renaissance in the U.S., analysts and suppliers said moving iPhone production to Apple’s home country was a nonstarter because the cost would be far beyond the cost of paying the tariff. 

“If consumers want a $3,500 iPhone we should make them in New Jersey or Texas or another state,” research firm Wedbush said in a recent note.

iPhone Tariff Q&A

Q: Dear president Trump, would a $3,500 iPhone be considered winning?
A: The question is moot because Apple is not going to bring the labor-intensive pieces to the US.

Q: So who will pay the tariffs?
A: Whatever Apple doesn’t eat, US consumers will pay the rest

Q: What tariff rate is that?
A: It will take a while to move labor intensive pieces from China to India. So Apple’s costs will be a blend of tariffs on China and India.

Q: How long will India’s tariff rate stay at 26 percent?
A: Good question. But who knows what Trump will do after he moans about moving operations to India.

Related Posts

April 7, 2025: What Happens if All Trade With China Comes to a Screeching Halt?

This is no longer a highly unlikely scenario after Trump threatens another 50 Percent Tariff on China.

China Retaliates Against Trump Tariffs

An April 4, 2025, I commented China Strikes Back With 34 Percent Tariffs, Stocks Plunge Second Day

China restricts 7 more rare earths, something I have warned about many times.

Whereas Trump may already be past the point China couldn’t care less what Trump does, the reverse is not true.

China can easily block rare earth exports to the world. If that happens, Trump will panic.

Clearly, “Trade wars are good and easy to win.”

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