Trump's 25% iPhone Tariff Threat Causes 3% Apple Stock Drop, Analysts Unfazed

Former U.S. President Donald Trump recently announced plans to impose a 25% tariff on non-U.S.-made iPhones, which initially caused a 3% drop in Apple Inc. (AAPL.US) stock price. However, financial analysts have remained relatively unfazed by this development, asserting that the impact on Apple's profitability would be minimal.

UBS, a leading financial institution, has maintained a "neutral" rating for Apple with a target price of $210. The firm believes that the incremental impact of Trump's tariff threat on Apple's earnings would be relatively small, given the current tariff landscape. However, UBS also notes that this threat could increase market uncertainty, potentially pressuring Apple's valuation.

UBS had previously estimated that a 20% tariff on smartphones assembled in China and a 10% tariff on those assembled in India would impact Apple's earnings per share by approximately $0.34, or about 5% of the estimated earnings per share for the fiscal year 2026. If a comprehensive 25% tariff were applied to the 70 million iPhones imported annually from China and India, UBS estimates the adverse impact on Apple's earnings per share could be around $0.51, slightly worse than the previous estimate.

Goldman Sachs has maintained a "buy" rating for Apple with a target price of $253. The firm argues that the recent tariff threat aligns with current trade policies, which include tariffs on goods from China, India, and Vietnam. Goldman Sachs suggests that the likelihood of smartphones receiving tariff exemptions has decreased compared to investor expectations. Despite this, Goldman Sachs remains optimistic about Apple's long-term prospects, citing the company's strong ecosystem, user base growth, and innovative products as factors that will offset any short-term cyclical challenges, such as extended replacement cycles for iPhones.

In conclusion, while the proposed 25% tariff on non-U.S.-made iPhones could have some impact on Apple's earnings per share, analysts generally agree that the overall effect on the company's profitability would be limited. The market's response to this news has been relatively calm, with investors and analysts focusing on the long-term prospects of the company rather than short-term fluctuations. The feasibility of shifting iPhone production entirely to the U.S. has been questioned by some analysts, who suggest that such a move would be impractical and could result in significantly higher production costs and retail prices.