Apple Absorbs Tariff Costs While Electronics Prices Surge, But How Long Will It Last?

[weckart]

Tariffs are a form of "mutually assured destruction". Everyone feels pain. Trump has almost 2 years until the midterm election so it's a good bet that China blinks first. If the tariffs last for awhile, most industries will diversify out of China and into other countries with lower tariffs. China will try to dump into other countries if they can and the other countries will respond with tariffs of their own against China.

When the current POTUS ignores the rulings of his own handpicked Supreme Court, doesn't know what the Declaration of Independence means and rides roughshod over the Constitution on a daily basis, it is bold of you to assume that midterm elections are going to proceed at all, let alone fairly.

Is Russia stealing intellectual property from the US, flooding us with Fentanyl, and tariffing US products ?

The US also doesn't want Russia to team up with China against the US. The US is also trying to end the war in force Ukraine to capitulate.

Except that there seem to be persuasive reports from whistleblowers that Musk, in particular, has handed over huge amounts of state secrets to the Russians. China has been arming the Russians in Ukraine. If Trump is seeking to drive a wedge between them, he has failed miserably. Neither likes or trusts the other but Moscow and Beijing are strange bedfellows united in their contempt for Washington.

Well…his good friend Putin thinks pretty highly of him 🙄

Really? You should have seen what the first channel on Russian TV has been broadcasting about Trump. What is said on this forum is mild stuff compared with that. Nothing gets past the censors there without Kremlin approval. Putin absolutely despises his useful idiot.

It’s interesting to me that a certain subset of the population claims that anyone with a different view from them is automatically labeled a bigot or a fascist, or in some cases they are even labeled as a rascist. Yet, isn’t that behavior an example of what you’re proclaiming?

"Different view" is really a mealy mouthed bowdlerisation of beliefs we thought we had vanquished and left behind eighty years ago. I am only surprised the played out cynical canard about "free speech" wasn't trotted out again. The same old claptrap, not even dressed up in new clothes and increasingly bold and shameless. If it walks like a duck...

Conversely, being tolerant of them doesn’t make you one automatically either.

All it takes for evil to triumph is for good men to do nothing. Burke would not have been "tolerant". Neither should any of us.

 

[raylo32]

Correct, except that "Like" may not be the best adjective. They certainly like what he does for them, but deep down they almost just as certainly laugh at him and believe he is a total idiot... useful or not.

I disagree that no one likes him outside the US. Putin, Netanyahu … In Europe seams to have become a model to nationalist ideologies (far right).

 

[Dutch60]

When the current POTUS ignores the rulings of his own handpicked Supreme Court, doesn't know what the Declaration of Independence means and rides roughshod over the Constitution on a daily basis, it is bold of you to assume that midterm elections are going to proceed at all, let alone fairly.

Except that there seem to be persuasive reports from whistleblowers that Musk, in particular, has handed over huge amounts of state secrets to the Russians. China has been arming the Russians in Ukraine. If Trump is seeking to drive a wedge between them, he has failed miserably. Neither likes or trusts the other but Moscow and Beijing are strange bedfellows united in their contempt for Washington.


Really? You should have seen what the first channel on Russian TV has been broadcasting about Trump. What is said on this forum is mild stuff compared with that. Nothing gets past the censors there without Kremlin approval. Putin absolutely despises his useful idiot.


"Different view" is really a mealy mouthed bowdlerisation of beliefs we thought we had vanquished and left behind eighty years ago. I am only surprised the played out cynical canard about "free speech" wasn't trotted out again. The same old claptrap, not even dressed up in new clothes and increasingly bold and shameless. If it walks like a duck...


All it takes for evil to triumph is for good men to do nothing. Burke would not have been "tolerant". Neither should any of us.

Very well said!👍

 

[Earendil]

Nobody is suggesting they lose money. They have a 47% profit margin. They can easily afford to reduce that and still make big profits.

Some Apple fans must be the only people on the planet who want to pay MORE for their electronics.

I’m not sure if you’ve missed something, or the logic isn’t there for you.

Apple averaging 47% profit margin does not mean the iPhone has a 47% profit margin. That’s number one.
Number two: For the sake of argument let’s assume the $1000 iPhone has a 47% profit margin. That number means:

A) cost is $530 per phone, $470 profit. (My example before covers almost this exact value, so you should see where this is going).

B) $530 * 2.45 tariff = $1,298.50

C) Selling a phone that costs Apple $1,298.50 for $1000 results in, you guessed it, a loss!

That is oversimplified, of course, but it’s not oversimplified to the tune of $300.

Other things to keep in mind:
1. Your 47% figure is *gross* profit margins, not *net* profit margins. Gross generally doesn’t take into account operational costs, R&D, etc. This is a better number to determine when loss kicks in.
2. Apple’s *net* profit margins for 2024 were 24.3%.
3. Software and SaaS generally have a higher net profit margin than hardware, because it tends to scale better. This means it’s *likely* that the iPhone has a profit margin less than 24%, while services have a higher profit margin.
4. Apple doesn’t publish iPhone net profit margins. But if the full tariff is applied, the iPhone *net* profit margin would need to be 59.9% just to *break even*.

Feel free to explain your version of the math, instead of resulting to personal insults again.

All it takes for evil to triumph is for good men to do nothing. Burke would not have been "tolerant". Neither should any of us.

That was not my argument at all. The argument you quoted was that being tolerant does not automatically make one a fascist. My argument is backed up both by the definition of tolerant, but also by your own reply. “Good” people can do nothing. Evil may triumph, but being a pacifist, for example, doesn’t inherently make one evil.
If your words aren’t a reply to me, then we we agree 🙂

 

[picpicmac]

I wonder if Apple TV+ will eat the brand-new tariff on movies.

Any guesses?

 

[Bryan Bowler]

Afterthought:
I consider NOT protesting against Trump and his MAGA fans, is acting in itself. Acting by staying silent and agreeing with what he says and does. That’s exactly what current Republicans seem to do right now. I don’t see any reason not to “grouping Republicans” at the moment.
I like to see and read otherwise ofcourse.

Am I understanding that you're automatically classifying all Replublicans into one side (the far right side) of that political party? My intent is not to twist your words and my apologies if I am misunderstanding what you're saying.

If I recall correctly, just over 77 million people voted in this last election for President Trump. I was one of them. But it does not necessarily mean that I agree with his approach on everything. Replubicans are wide-ranging in their beliefs or on issues that are important to them, but by no means should everyone be classified into one lump category. Same goes for the Democratic Party...just because one is a Democrat does not mean they are a far-left liberal.

Obviously a guess on my part, but I estimate there are tens of millions (if not 100+ million) Democrats and Replubicans in the United States that are a lot closer on political ideology and values than most people think. Trying to automatically label people is, in it's most basic form, a form of discrimination and hate.

 

[nebo1ss]

I feel sure that Apple will raise prices worldwide to reduce the financial pain that would otherwise be inflicted purely on US consumers.

The rest of the world would not be very happy about this. Why should we pay for bad decisions being made in the US.

 

[nebo1ss]

Am I understanding that you're automatically classifying all Replublicans into one side (the far right side) of that political party? My intent is not to twist your words and my apologies if I am misunderstanding what you're saying.

If I recall correctly, just over 77 million people voted in this last election for President Trump. I was one of them. But it does not necessarily mean that I agree with his approach on everything. Replubicans are wide-ranging in their beliefs or on issues that are important to them, but by no means should everyone be classified into one lump category. Same goes for the Democratic Party...just because one is a Democrat does not mean they are a far-left liberal.

Obviously a guess on my part, but I estimate there are tens of millions (if not 100+ million) Democrats and Replubicans in the United States that are a lot closer on political ideology and values than most people think. Trying to automatically label people is, in it's most basic form, a form of discrimination and hate.

Perhaps you can tell us which parts of his agenda you agree with. Going after anything and anyone who disagrees with him like Law firms, universities, countries, anyone involved in investigating his many crimes. His total lack of understanding of financial markets and tariffs. His blatant use of his office to enrich himself. I could go on and on.

 

[Dutch60]

Am I understanding that you're automatically classifying all Replublicans into one side (the far right side) of that political party? My intent is not to twist your words and my apologies if I am misunderstanding what you're saying.

That’s exactly what I said, although that might be a bit too simplistic.

If I recall correctly, just over 77 million people voted in this last election for President Trump. I was one of them. But it does not necessarily mean that I agree with his approach on everything. Replubicans are wide-ranging in their beliefs or on issues that are important to them, but by no means should everyone be classified into one lump category.

That could very well be the problem in the US system…only 2 “real” parties to choose from leaves too little room for more nuanced viewpoints. Now every Republican seems a Trump / MAGA supporter.
If it’s true that Trump now does everything he said before, then I can only conclude that Trump voters where informed when they voted. Trump/MAGA movement is far right..in my opinion extreme right (up to fascist).
So…knowing what he said and what he would do once in office….what does that say about persons who voted for the Great Leader Trump and thereby supported him and his MAGA clan?
On top of that I do not see any protests from any Republican. If you (and as you suggest more Republicans), do not agree with mr. T’s policies…it doesn’t show anywhere. Fear already (that’s normal in a dictatorship)?? Agreement?? What?

Same goes for the Democratic Party...just because one is a Democrat does not mean they are a far-left liberal.

I do not see any far-left Democrats. I consider the Democratic Party as centre right. Where I live, the Democratic Party would be considered (mildly) right wing (certainly not extreme right wing, as the Republican Party has become under Trump).

Obviously a guess on my part, but I estimate there are tens of millions (if not 100+ million) Democrats and Replubicans in the United States that are a lot closer on political ideology and values than most people think.

I think the “traditional” Republican Party has moved to the far-right…to dangerously far-right even.
Official and general policy of the Republican Party seems to be…support Trump!
I would like to learn from you, if that’s definitely not the case.
Where? On what subjects? How does this show?

It might be that you don’t agree with the current Republican Party’s viewpoints anymore. In that case, you made a mistake in voting for Trump (no problem with that and I can only hope that many, many more regret such a choice, before it’s too late)

Trying to automatically label people is, in it's most basic form, a form of discrimination and hate.

You’re right and I should not do that. Unfortunately I don’t see or hear any protests from any reasonable group of Republicans. On the contrary even. Dead silence. Do you say that silence doesn’t mean approving? If not, what does it say?

So again…you voted for Trump.
Can you give me a number of actions of this administration that you are happy with?

In my opinion there’s 1 person that, with his policies and the support of MAGA clan and voters, is spreading hate and discrimination. I’ll help you guessing…his name starts with the letter T…and ends with the letters …rump.
Unfortunately and incomprehensible to me…he has many Republicans (all?), supporting him and defending him.

I hope, you can give me some answers.

Thank you.

Edit: agree with the post from @nebo1ss above. Also curious here.

 

[dumastudetto]

Apple will always strive to keep prices as low as possible for us loyal customers. We have to be realistic, this isn't sustainable forever. So if you're thinking of buying new Apple devices, buy everything now to save some money.

 

[0049190]

I’m not sure if you’ve missed something, or the logic isn’t there for you.

Apple averaging 47% profit margin does not mean the iPhone has a 47% profit margin. That’s number one.
Number two: For the sake of argument let’s assume the $1000 iPhone has a 47% profit margin. That number means:

A) cost is $530 per phone, $470 profit. (My example before covers almost this exact value, so you should see where this is going).

B) $530 * 2.45 tariff = $1,298.50

C) Selling a phone that costs Apple $1,298.50 for $1000 results in, you guessed it, a loss!

That is oversimplified, of course, but it’s not oversimplified to the tune of $300.

Other things to keep in mind:
1. Your 47% figure is *gross* profit margins, not *net* profit margins. Gross generally doesn’t take into account operational costs, R&D, etc. This is a better number to determine when loss kicks in.
2. Apple’s *net* profit margins for 2024 were 24.3%.
3. Software and SaaS generally have a higher net profit margin than hardware, because it tends to scale better. This means it’s *likely* that the iPhone has a profit margin less than 24%, while services have a higher profit margin.
4. Apple doesn’t publish iPhone net profit margins. But if the full tariff is applied, the iPhone *net* profit margin would need to be 59.9% just to *break even*.

Feel free to explain your version of the math, instead of resulting to personal insults again.



That was not my argument at all. The argument you quoted was that being tolerant does not automatically make one a fascist. My argument is backed up both by the definition of tolerant, but also by your own reply. “Good” people can do nothing. Evil may triumph, but being a pacifist, for example, doesn’t inherently make one evil.
If your words aren’t a reply to me, then we we agree 🙂

I don’t agree with you. Apple could lower the price of the iPhone to offset the additional tariff costs and still make a good profit. I’m finished with this debate.

 

[weckart]

I don’t agree with you. Apple could lower the price of the iPhone to offset the additional tariff costs and still make a good profit. I’m finished with this debate.

I'm not sure Apple could. It's tricky because tariffs are charged on the landed cost of iPhones on import. Lowering the selling price to the consumer would give Apple even larger losses. The only wiggle room Apple has are the IP charges it makes to its overseas subsidiaries to reduce their profitability and overseas tax exposure to keep as much of the profit with its US holding company as possible. I'm not sure that applies to hardware shipped directly from China to the US. I would presume that all the transactions are made directly from the US and would not involve licensing issues, such as they exist in the EMEA market. If they somehow do, and Apple tries to lower the landing cost of iPhones that way, it would open the floodgates for similar cost adjustments in the EU market for one, thus bumping up Apple's tax burden there. Short term, that would reduce, if not eliminate, the losses but long term, Apple would be screwed in trying to use transfer pricing to save on overseas tax.

Apple's only option while tariffs remain this high is to nix China and Vietnam as manufacturing sources for US phones and swallow the Indian tariffs as much as possible. The question is, does India have enough capacity to fulfill its local AND the US markets?

 

[raylo32]

These days they are pretty much all far far right... or more correctly Trumpers. The moderates have been driven off... candidates primaried, cacucuses rid of them. Purity and loyalty tests that would be familiar to any facsist anywhere. And look at the polls that say something like 87% of GOP voters approve of all this DOGE and tariff nonsense and Trump's flouting of the Constitution and the rule of law. I am sure there are some exceptions that in their scarcity only serve to prove the rule.

Am I understanding that you're automatically classifying all Replublicans into one side (the far right side) of that political party? My intent is not to twist your words and my apologies if I am misunderstanding what you're saying.

 

[turbineseaplane]

People railing against China, or who think they are set to "fold to the Don" have some really outdated views on who and what China as a country and an economy are at this point in time.

A lot has changed there in the last 10-15 years.

 

[raylo32]

For sure, the Trumpers are delusional with this "China is capitulating" nonsense. Remember WE put the extra tariffs on THEM and did not specify any conditions for relaxing them. After all the whole idea was to make them permanent to reshore manuacturing. This is all apples and oranges, of course... but Trumpers just eat up the showboating nonsense Trump tells them to believe.

People railing against China, or who think they are set to "fold to the Don" have some really outdated views on who and what China as a country and an economy are at this point in time.

A lot has changed there in the last 10-15 years.

 

[SactoGuy18]

You make it look like it was Xi who started rising the tariffs.

It’s nonsense to think that Xi is trying to be Mao. Not even close. That is the regular run of the mill fear mongering.

The problem is bigger than you think. We are dealing with a super power economy with “no foreign dept” and comparatively reduced import dependencies. China seams to be mostly self sufficient. There is little US or the EU can do to pressure China economically without backfiring.

China's economy has imploded because the infrastructure projects have failed (all those unused apartments now coming down), almost no country wants to be part of the Belt and Road initiative, and now most of the world no longer wants their product exports, either. Unemployment has shot through the roof with good reasons, too. And now Xi's inner circle of political friends are falling rapidly. Xi does not want to lead a country with an imploding economy, especially now with Foxconn and Pegatron leaving the country really quickly, which means except for specialized products Apple will be producing most of their products outside of China within a few years.

 

[turbineseaplane]

China's economy has imploded because the infrastructure projects have failed (all those unused apartments now coming down), almost no country wants to be part of the Belt and Road initiative, and now most of the world no longer wants their product exports, either. Unemployment has shot through the roof with good reasons, too. And now Xi's inner circle of political friends are falling rapidly. Xi does not want to lead a country with an imploding economy, especially now with Foxconn and Pegatron leaving the country really quickly, which means except for specialized products Apple will be producing most of their products outside of China within a few years.

I just have to ask -- where are you getting your information from?

 

[Nuno Lopes]

China's economy has imploded because the infrastructure projects have failed (all those unused apartments now coming down), almost no country wants to be part of the Belt and Road initiative, and now most of the world no longer wants their product exports, either. Unemployment has shot through the roof with good reasons, too. And now Xi's inner circle of political friends are falling rapidly. Xi does not want to lead a country with an imploding economy, especially now with Foxconn and Pegatron leaving the country really quickly, which means except for specialized products Apple will be producing most of their products outside of China within a few years.

It seams that you have read the reality book and rewrote it upside down.

Look. I don’t want a non Democratic regime pulling the international strings. Yet, denial is not the way to surpass a challenge. Democracy is being challenged!

The EU still stands strong has a Democratic regime. The US? I am not so sure if it had capitulated already or not as a Democratic regime.

Time will tell.

PS: There is a current of very smart people that find Democracies inefficient has it allows “idiots” to vote the destiny of a country as they do. Check how these people talk about others that think differently from them. You will recognize the symptom.

Anyway, this is entirely off topic. The issue is the effects of import taxation and how it impacts Apple.

 

[raylo32]

He was sort of right about some of the weaknesses in China, like the overbuilding and such, but drew ridiculous, biased and overly dire conclusions. Instead, this tariff nonsense will end up making China stronger as they adapt to it. Trump, as usual, has it all wrong.

And you are correct, we are NOT currently a democratic regime. We are a dotardocracy, run by the man who bankrupts casinos. Not sure how that is even possible, but he is THAT stupid.

It seams that you have the reality book and wrote it upside down.

Look. I don’t want a non Democratic regime pulling the international strings. Yet, denial is not the way to surpass a challenge.

The EU still stands strong has a Democratic regime. The US? I am not so sure if it had capitulated or not as a Democratic regime.

Time will tell.

 

[Nuno Lopes]

He was sort of right about some of the weaknesses in China,

Yes China has overreached real state production. But China is managed differently.

It seams that the state is moving in, buying at a low price as the private sector is disbanding due to retracting demand for the current street price.

The Gov can then launch programs to relocate and host the pupulation that need a house at a cheaper price. It has Capital to do that. Remember how Trump got rich? I believe that they expected the bubble to bust sometime and collect the left overs at a cheaper price, win win.

This is really not an easy challenge. But like any game, a lot of times is won because the opponent drops the ball.

We need to stand strong and practice some patience. Right now, it looks to me that we, the West, are looking weak in too many fronts. Some of it reaching foundational areas. Just today saw an interview where the US President says he does not know if he needs to uphold the US Constitution, justifying it as being elected by millions. It seams that the American Constitution was on trial in the previous election. Something not long ago he swore to uphold. He is definitely testing the idea and will observe carefully how society reacts to the statement.

We haven’t been smart at least in the last decade or more. That goes to all Democratic political spectrum. I have always seen the biggest US political parties has defendants of the Democracy and its institutions … not long ago the word was that America used to fight for those values. But who knows now, the weather is not the only climate that seams to be changing.

How the state is propping up China’s housing market

As the government struggles to ease a real estate crisis, state-owned developers have been buying up land

ig.ft.com

Time will tell.

 

[ToroidalZeus]

Tariffs are a form of "mutually assured destruction". Everyone feels pain. Trump has almost 2 years until the midterm election so it's a good bet that China blinks first. If the tariffs last for awhile, most industries will diversify out of China and into other countries with lower tariffs. China will try to dump into other countries if they can and the other countries will respond with tariffs of their own against China.

Only large companies like Apple can diversify their supplychain away from China into India. Many smaller components or products can't shift production to other nations so Americans will have higher prices for many goods.

 

[weckart]

Only large companies like Apple can diversify their supplychain away from China into India. Many smaller components or products can't shift production to other nations so Americans will have higher prices for many goods.

Worse than that, smaller companies cannot hold large stocks to tide them over until they can find alternative sources less hit by tariffs. They will likely fold as Amazon etc undercut them. That will lead to more consolidation in the market of retailers for certain items at least in the short to medium turn. That is not great for competition.

 

[DotCom2]

delete

 

[Earendil]

I don’t agree with you. Apple could lower the price of the iPhone to offset the additional tariff costs and still make a good profit. I’m finished with this debate.

So I brought numbers and math, and you brought…a hunch?
I absolutely agree that you’re finished in this “debate” 🙂

 

[wbeasley]

So I brought numbers and math, and you brought…a hunch?
I absolutely agree that you’re finished in this “debate” 🙂

Why would Apple sacrifice profit to sent it to government as tariff?

If prices try to stay the same as currently then companies will go broke.
That makes no sense.

Fortunately Apple can still sell product internationally as normal.
It will be US citizens who either pay more or buy fewer products until sanity prevails again...