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Home / Apple / Apple faces 14% price increase if the US adds a new 25% Chinese tariff

Apple faces 14% price increase if the US adds a new 25% Chinese tariff



High prices already led Apple's iPhone sales to the plateau during the typical high holiday, and a new round of US tariffs against Chinese-made products is seriously jeopardizing its upcoming revenues, CNBC said today. At a threatened 25% rate, Apple would have to increase its US rates by around 14% to keep margins constantly across its suppliers – one of several scenarios that could damage iPhone sales.

As projected by analysts at JP Morgan's 14% increase, the US price of an iPhone XS would rise from just under $ 1,000 to $ 1,142 to offset new tariff-related expenses. The prices of most other Apple devices will probably also be affected, so the more affordable iPhone XR would jump over $ 1

00 to $ 855, and the MacBook Air at the entry level would climb from $ 1,199 to $ 1,369 in front of the lucrative back to school shopping season.

A much less likely scenario will see Apple moving production to the US. Bank of America suggests that US production will increase Apple's costs by 15-25% – 20% if the entire phone was manufactured in the United States – as if consumer consumption could "lead to demand destruction, in our opinion." [19659002] However, Morgan expects Apple to absorb some or all of the tariff-related expenses itself – a move that would reduce its typical 38-39% gross margins, albeit only around 4%. The smaller number will reflect the fraction of Apple's total sales attributable to US purchases, and likely to be understandable by investors as a temporary goodwill measurement to satisfy customers at a time of great economic turmoil.

Apple's price problems have been the subject of many discussions over the past six months, as the company has tried to maintain its US pricing while offering various incentives such as purchasing and financing to attract more customers. At the same time, the company has beaten its prices in selected developing countries, blaming unfavorable exchange rates for its own high margins for regional demand weaknesses.

While the United States has not yet formally introduced the 25% tariff against China, the formal approval process to implement it began yesterday. If approved, charges may come into effect on June 24, several months before Apple's annual launches of the flagship iPhone, Apple Watch, Mac and iPad.


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