Why Trump’s iPhone Tariff Proposal May Not Lead to U.S. Production Shift

The once-solid relationship between President Donald Trump and Apple CEO Tim Cook is breaking down over the idea of a U.S.-made iPhone. Trump is upset with Apple's plan to source the majority of iPhones sold in the U.S. from its factory partners in India, instead of China. Cook officially confirmed this plan earlier this month during earnings.Trump wants Apple to build iPhones for the U.S. market in the U.S. and has continued to pressure the company and Cook. In a social media post, Trump threatened to slap a 25% tariff on iPhones, stating, "I have 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."However, analysts argue that it would be more cost-effective for Apple to absorb the cost of a 25% tariff on iPhones sold in the U.S. market rather than move production stateside. "In terms of profitability, it's way better for Apple to take the hit of a 25% tariff on iPhones sold in the US market than to move iPhone assembly lines back to US," wrote Apple supply chain analyst Ming-Chi Kuo.Despite the potential tariffs, experts have long held that a U.S.-made iPhone is impossible at worst and highly expensive at best. Made in the U.S.A. iPhones would be much more expensive, with estimates ranging between1,500 to $3,500 to buy one at retail. Labor costs would certainly rise, and it would also be logistically complicated.Analysts have expressed skepticism about Trump's threat, predicting that Apple might be able to strike a deal with the administration or challenge the tariffs in court. Wells Fargo analyst Aaron Rakers wrote that Apple could try to preserve its roughly 41% gross margin on iPhones by raising prices in the U.S. by between $100 or $300 per phone.It's unclear how Trump intends to target Apple's India-made iPhones. Rakers wrote that the administration could put specific tariffs on phone imports from India. Apple's operations in India continue to expand, with Foxconn building a new $1.5 billion factory that could do some iPhone production. Apple declined to comment on Trump's post.