Investing.com -- US president Donald Trump imposed a 10% tariff on imports from China over the weekend, raising questions about the potential impact on Apple’s supply chain and earnings.
In the last tariff cycle, Apple (NASDAQ:AAPL) secured an exemption for iPhones, but according to Bank of America (NYSE:BAC) analysts, it remains uncertain if the company will be able to do the same this time.
Nonetheless, BofA sees the tariff’s effect as “manageable.” The firm estimates that “80% of the devices sold in the US can be sourced from outside of China,” reducing Apple’s exposure to the new import duty.
If Apple keeps prices unchanged, BofA estimates a “negligible $0.05 negative impact to earnings.” However, if Apple raises prices by 3% in the US, the earnings impact “could be offset, even though it may sell fewer units in the US.” Given the small impact, analysts believe Apple “may choose not to raise prices at the present time.”
Analysts also point out Apple’s ability to shift production outside of China.
“Most iPhone models can now be manufactured in India,” analysts led by Wamsi Mohan said, and other Apple products are already produced in Vietnam and Malaysia. If half of the devices sold in the US still come from China, BofA estimates the EPS impact would be a negative $0.12 if Apple chooses not to hike prices and a negative $0.07 if it does.
Overall, BofA expects the tariff to have minimal impact on Apple’s earnings, as the company can mitigate the effects through supply chain adjustments and pricing strategies.
The bank also suggests that the US administration could take a more favorable stance on ongoing regulatory issues involving Apple and Google (NASDAQ:GOOGL), while also advocating for reduced oversight in Europe.
BofA maintains a Buy rating and a price target of $265 on Apple stock, citing strong cash flows, resilient earnings, and potential growth from AI integration.