Apple (AAPL -3.82%) has endured a difficult time on the stock market in 2025 as investors have worried about implications of the Trump administration’s tariffs on imports from one of its main manufacturing hubs, China, as well as the reciprocal tariffs on other trade partners where the tech giant manufactures its devices.
Shares of the iPhone maker have pulled back 20% this year as of this writing. However, a recent development suggests that Apple may find some reprieve as imports of smartphones, computers, and other electronic items such as processors and displays have been exempted from the reciprocal tariffs imposed on China.
Does this mean it is time to capitalize on Apple’s dip and buy shares of this tech giant? Let’s find out.
Why tariffs could have derailed Apple’s growth
The Trump administration initially announced reciprocal tariffs of 125% in addition to the existing 20% duties on imports from China. This would have made iPhones and other consumer electronics items that the company manufactures in China way dearer, which explains why Apple stock dropped when the tariffs were announced.
So the pause on smartphones and other electronic items from China should come as a relief for Apple, which scrambled to ship an estimated 1.5 million iPhones from India to the U.S. last month to beat the tariff deadline. It is worth noting that the U.S. imposed a 26% tariff rate on imports from India, but they have been paused for 90 days.
The bottom line is that Apple seems to be relatively safe from the tariff-related tensions, at least for now. The company would have otherwise faced an adverse impact of $7 billion to $8 billion on iPhone sales, as per Morgan Stanley, even if it managed to shift the majority of its production to India, which was initially in a much lower tariff slab as compared to China.
That’s because around 80% of Apple’s production capacity reportedly lies in China, according to Evercore ISI. That’s way higher than India, where Apple reportedly assembles around 10% to 15% of its iPhones. Meanwhile, countries such as Vietnam, Malaysia, and Thailand are Apple’s other production hubs, where it produces iPads, wearable devices, and MacBooks. All these countries were initially in the net of reciprocal tariffs before the pause went into effect.
The company’s mass production facilities in the U.S. are almost negligible, which explains why Apple stock has been under pressure. Import duties would have increased the prices of Apple’s products, and it would have had to pass on the higher costs to customers by increasing prices. Such a scenario was likely to negatively impact Apple’s iPhone sales, which were already under pressure last year.
Market research firm IDC estimates that Apple’s iPhone shipments declined by almost 1% in 2024 to 232 million units. The company has been late in offering artificial intelligence (AI) features to its smartphone customers when compared to rivals such as Samsung and Chinese smartphone manufacturers. A tariff-fueled increase in prices would have hampered sales of iPhones and other products at a time when the company’s gradual roll-out of AI features had started having a positive impact on sales.
Additionally, Apple would have faced margin challenges if it had been unable to pass on the increased costs to customers. This explains why analysts have reduced their earnings expectations from Apple for the current fiscal year.
AAPL EPS Estimates for Current Fiscal Year data by YCharts
The tech giant is trying to mitigate the potential fallout from tariffs
We have already seen that Apple ramped up its production in India and brought iPhones into the U.S. to beat the tariffs before the administration announced the pause. So, it could start bolstering its manufacturing capacity in countries that are likely to witness lower tariff rates.
Additionally, Apple has outlined a massive $500 billion investment plan to shore up its manufacturing operations in the U.S. over the next four years. However, that’s not going to happen immediately, as bringing complex supply chains into the U.S. will take time. All this means that Apple will remain exposed to the tariff turmoil until there is a concrete resolution.
Now, it remains to be seen how this tariff saga unfolds going forward, especially considering recent developments which suggest that the administration is willing to be flexible. The uncertainty around Apple’s financial performance seems here to stay. However, if the company manages to deliver better-than-expected numbers or if the end result of the tariff war turns out in its favor, it may be able to regain its mojo.
Consensus estimates are projecting a 7% increase in Apple’s earnings this fiscal year, followed by an estimated jump of 11% in the next one. The stock is currently trading at 31 times earnings, a premium to the tech-laden Nasdaq-100 index’s earnings multiple of 28 (using the index as a proxy for tech stocks).
So, investors would do well to stay on the sidelines for now as a mix of tepid earnings growth, the tariff turmoil, and a slightly richer valuation could keep weighing on the stock. However, it may be a good idea to keep an eye on Apple as it may become worth buying if it becomes cheaper and there are favorable developments on the tariff front since the proliferation of AI could turn out to be a big catalyst for the company in the long run.