Trump’s New Tariffs Test Apple’s Global Supply Chain

When President Trump first pushed tariffs on China in 2018, Apple began moving more production of iPads and AirPods to Vietnam and iPhones to India.

But with Mr. Trump’s return to the White House, that strategy may have backfired for the world’s most valuable publicly traded company.

On Wednesday, Mr. Trump said that the United States would put tariffs of 46 percent on Vietnam and 26 percent on India. The White House has said the tariffs are effective immediately, but some trade experts consider them to be preliminary and designed to be a starting point for negotiations to reduce overseas tariffs.

The proposed tariffs threaten to compound the pressure on Apple’s business. The company is already dealing with 20 percent tariffs on products imported from China, where Apple makes about 90 percent of the iPhones it sells around the world. Mr. Trump said that the rate would go to 34 percent under his new tariff plan.

The new levies are part of Mr. Trump’s efforts to remake world trade with tariffs on every country that imposes fees on American exports. U.S. trade officials estimate that India has a tariff rate of 13.5 percent on U.S. goods, with a 39 percent tariff on agricultural products. Vietnam has a tariff rate of 8.1 percent on U.S. goods, with a 17.1 percent tariff on agricultural products.

But during a news conference at the White House, Mr. Trump said the combination of tariffs, currency manipulation and trade barriers had a much more significant impact.

The costs of “reciprocal tariffs,” as Mr. Trump calls them, could put Apple’s business in a jam. The iPhones, iPads and Apple Watches that the company sells deliver three-quarters of its nearly $400 billion in annual revenue. With Mr. Trump saying he won’t allow products to be exempted from tariffs, Apple will have to either pay those fees, which will reduce its profit, or indirectly pass those added costs on to customers by raising prices.

The tariffs on iPhones and other devices imported from China will increase Apple’s annual costs by $8.5 billion, without any relief from the Trump administration, according to Morgan Stanley. That would reduce the company’s profit next year by $0.52 per share, or about $7.85 billion. That would be a roughly 7 percent hit on next year’s profits.

Apple’s stock fell 4.7 percent in aftermarket trading following Mr. Trump’s remarks.

“Apple will take these new tariff numbers and put them in models they have built and know within hours how big of a problem they have,” said Anna-Katrina Shedletsky, the founder of Instrumental, a Bay Area company that uses artificial intelligence to improve manufacturing performance. She previously worked at Apple.

After Mr. Trump took office, Tim Cook, Apple’s chief executive, went to the White House and promised that Apple would invest hundreds of billions of dollars in the United States. In February, Apple followed through on that promise by pledging to invest $500 billion in the country, with much of the money already part of its spending plans.

During the previous Trump administration, Mr. Cook’s work to build a relationship with Mr. Trump helped Apple avoid tariffs on most of its products. U.S. trade officials in the previous Trump administration didn’t put tariffs on iPhones, and they removed tariffs from the Apple Watch.

In 2019, Mr. Trump toured an Apple plant in Texas that made desktop computers. Mr. Cook stood beside Mr. Trump as the president took credit for the plant, which had been making computers since 2013.

In the years since then, Apple hasn’t moved production of a single major product to the United States. Instead, it embarked on an effort to diversify beyond China.

In 2017, as Mr. Trump started in office, Apple began setting up assembly lines for iPhones in India. It took five years for it to train workers and build the infrastructure to make its newest iPhones in the country. It is in the process of increasing production there, with hopes the country’s factories manufacture about 25 percent of the 200 million iPhones that it sells annually.

The company also began shifting production of AirPods, iPads and MacBooks to Vietnam. The country became a destination for Apple and others after Covid-19 shut down factories in China in 2020, and Vietnam’s factories accounted for more than 10 percent of the top 200 suppliers that the company had in 2023.

Vietnam was an appealing location because of its proximity to China. India was alluring because Apple wanted to boost sales of iPhones in the country, which is the world’s second largest smartphone market.

But Apple has struggled in the past with U.S. production. The Texas plant that made Macs had problems as some workers walked off the job after their shift but before their replacements had arrived, forcing the company to shut down the assembly line. It also struggled to find suppliers that could make components it needed like a custom screw.

Mr. Cook has said that the United States doesn’t have enough skilled manufacturing workers to compete with China. At a conference in late 2017, he said that China was one of the few places where Apple could reliably find people capable of running the state-of-the-art machines that make its products.

“In the U.S., you could have a meeting of tooling engineers, and I’m not sure we could fill the room,” Mr. Cook said. “In China, you could fill multiple football fields.”