Apple CEO Tim Cook revealed some much-anticipated details about the impact of President Donald Trump’s trade war on his company, describing a relatively modest increase in costs this quarter. But his response didn’t entirely satisfy Wall Street, which was anxious for a big-picture assessment of Apple’s exposure to the tariffs.
In an earnings call on Thursday, Cook said the new tax on imported supplies would cost Apple an extra $900 million in the June quarter, assuming no further changes in tariffs, after only a “limited impact” in the March quarter. Asked by analysts to predict the longer term cost of the tariffs, Cook deflected from giving any specific numbers, saying the situation was fluid, but hinted that the price tag could rise.
“We will manage the company as we already have—with thoughtful deliberate decisions,” Cook said.
Apple’s shares fell 4% in after-hours trading to $204.94.
Apple, the world’s most valuable company, is among the many corporate giants scrambling to adapt their business operations to weather the barrage of tariffs unleashed by Trump. Earlier on Thursday, General Motors told investors it expected to take a $4 billion to $5 billion hit this year as a result of the automobile tariffs imposed by Trump.
Trump sent shockwaves across corporate America on April 2, when he said he would impose a steep tax on products imported from abroad, including a 145% levy on goods from China. Apple risked being particularly impacted because a big chunk of its production is in China.
In the aftermath, investors, worried by the potentially devastating impact of the tariffs on Apple, sent its shares tumbling. In just a few days, the company’s stock fell 20%, erasing hundreds of billions of dollars in market value, before recovering more recently.
A week later, as financial markets verged on chaos, Trump gave tech companies including Apple at least a temporary reprieve by exempting smartphones and other electronics from his tariff plans. But the industry still faces huge uncertainty about the future as the White House mulls a separate tax on imported tech products.
During Thursday’s call, Cook laid out some of the maneuvering Apple has undertaken to minimize the impact of the China tariffs as much as possible. The strategy has included shifting the countries from which Apple imports its all-important iPhone into the U.S. along with other devices.
Most of those iPhones in the current quarter will come from India, where Apple has scrambled in recent years to increase its manufacturing and where tariffs are lower than in China. “Nearly all” other products imported into the U.S., he said, such as Mac computers and iPads, will be sourced from Vietnam, where tariffs are also lower.
Cook added that Apple would continue with diversifying its manufacturing and supply chain outside of China. “What we learned some time ago was that having everything in one location had too much risk with it,” he said.
Analysts on the call repeatedly asked Cook to talk about the impact of tariffs on Apple beyond the June quarter and whether it would lead consumers to buy fewer devices as the economy sours. Each time, he declined, saying it’s too difficult to predict more than a few months out given the current environment.
In fact, during the call, Cook never once directly mentioned Trump. But he did say Apple is party to ongoing talks about the administration’s future tariff policy.
Cook also played to Trump by reiterating Apple’s recently announced plans to spend $500 billion in the U.S. over the next four years, including a plant in Texas for producing servers and buying 19 billion U.S.-made chips. Trump, of course, has said his tariff plan is intended to increase corporate investment in the U.S. and create jobs domestically, reversing a decades-long trend of globalization.
But bringing manufacturing of consumer devices to the U.S. would be a years-long process, if at all possible, due to the lack of a domestic supply chain and skilled workers. Doing so also risks raising costs on each device by hundreds of dollars, making them far less competitive if those costs are passed on to consumers.
Apple’s results for the quarter ending March 29 were largely in line with what Wall Street had expected. Revenue rose 5% to $95.4 billion from the same period a year earlier while profits grew 5% to $24.8 billion.
Analysts had raised the possibility that tariffs would cause customers to stock up on Apple devices in the quarter, before any tariff-induced price hikes kicked in. Cook downplayed the idea during the call, saying that there was no evidence of any significant change in customer behavior.
Still, Apple’s sales in the Americas, dominated by the U.S. market, rose 8% in the quarter to $40.3 billion.
In contrast, analysts feared that sales in China would decline as customers reacted to the trade war by retaliating against U.S. vendors like Apple. They were correct to a point: Sales in Greater China, which also includes Taiwan, fell 2% to $16 billion, but Cook said they were flat if changes in foreign exchange weren’t taken into account.
