Trump Says People ‘Could Stand’ a 10% iPhone Tariff ‘Very Easily’

While Apple has largely slid by under the radar with regards to its products being implicated in the ongoing trade wars between the U.S. and China, President Donald Trump, in a recent interview with The Wall Street Journal, suggested that if he’s unable to “reach a deal with China,” then other products (including Apple’s iPhone and consumer laptops) will likely be subject to additional import tariffs, too.

“Maybe. Maybe. Depends on what the rate is,” the President said of imposing additional tariffs on mobile phones like iPhone, specifically.

“I mean, I can make it 10%, and people could stand that very easily.”

While the Trump administration has yet to officially forge ahead with imposing these additional tariffs — citing concerns over the likelihood of a negative consumer response, the President’s comments are nevertheless coming at a bad time for Apple — whose stock (NASDAQ; AAPL) in recent weeks has shed over 20 percent of its value amid increasingly bleak reports of weaker than expected iPhone demand.

Of course, the President is known perhaps best of all for his oftentimes fiery rhetoric and flip-flopping on ideas. But, even as preliminary as it may be, Trump’s idle threat of additional tariffs already has some analysts and investors feeling skittish.

“The Street will not be taking this news lightly as with the litany of bad news Apple (and its investors) have seen over the last month,” noted Wedbush Securities analyst, Daniel Ives, in a research note obtained by Barron’s this week. “From the Cook iPhone metrics pull, softer data points out of Asia around XS/XR initial demand, and now this tariff threat on iPhones out of left field from Trump and Beltway will surely add to this white knuckle period for Apple.”

“While we ultimately believe this is all part of a broader negotiation with China as talks heat up over the next week, now Cook and Apple find themselves squarely at the center of the tariff talks which were previously background noise as investors try to gauge what a potential 10% tariff on iPhones and other products would do to demand and unit growth over the next 6 to 12 months if ultimately imposed.”

As of this write-up, AAPL was trading at $172.89 per share (down 0.92% for the day, and down roughly 22% overall since November 1, 2018.

America First?

Trump (echoing some of his previous sentiments in last week’s WSJ interview) ultimately advised that if Apple [or any other company] is looking to avoid tariffs, they should start considering building those products here in the U.S. instead of China.

But as we’ve noted several times before, and as Ives himself reiterates in his note to investors, the reality is that Apple will never abandon its Far East supply-chain.

“The reality is Apple and Cook are firmly implanted in China as a core production factory and ultimately we would not see this dynamic changing in the foreseeable future,” Ives said.

Trump is scheduled to meet with his Chinese counterpart, President Xi Jinping, later in the week, with the topic of tariffs likely to take center stage.