After months of negotiations, US President Donald Trump has finally hit countries around the globe with his massive tariffs plan. In that process, India has suffered a consequential blow of 25% tariff imposition, while also having to face demoralising jibes at the hand of the American leader.
Given his original ‘America First’ stance, one can’t help but quickly expect Apple’s ties with India to take a major hit. The situation especially seems to be slipping out of control over the tech giant’s projection that it could suffer $1.1 billion in tariff-related costs in the September quarter.
The iPhone broke all analyst expectations of $40 billion, surpassing even last year’s $39.3 billion results for the same period, for the quarter ending in June by generating $44.5 billion in revenue. Despite the unmissable boost in iPhone sales, CEO Tim Cook broke the word on the looming tariff threat on a call with analysts, as per CNN.
Apple’s India connection explored
Earlier this year, Apple renounced its China roots by moving production to India in a significant maneuver to avoid Donald Trump’s tariffs. The MAGA leader’s threats, however, didn’t stop there. In May, he doubled down on his demands for the iPhone to be made in the US.
“I have long ago informed Tim Cook of Apple that I expect their iPhone’s that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” he posted on his Truth Social platform at the time. “If that is not the case, a Tariff of at least 25% must be paid by Apple to the US.”
Just weeks before Trump’s big 25% tariff threat, Tim Cook shared in a quarterly earnings call that their move to diversify their global supply chain has resulted in “the majority of iPhones sold in the US” with “India as their country of origin.”
A few days ago, Bloomberg reported that India had usurped China, taking on the post of the top source of smartphones sold in the US, thanks to Apple shifting its focus to the South Asian country. According to Canalys data, India remained the largest smartphone manufacturer for US-bound products for the first time.
Where do Trump tariffs leave Apple’s India production?
Despite the current 25% tariff threat hanging over India, the Trump government’s previous declaration in April exempted electronics, including smartphones and computers, from reciprocal tariffs.
As of now, Apple Inc’s US-destined iPhone exports from India remain unscathed by the brand-new hefty imposition of 25% tariffs. Given the current situation, the South Asian country contributes to more than a fifth of the global iPhone production.
However, a potential exemption lift in the electronics domain could result in iPhones production and assembly falling back on the local source instead of its current internationally-made focus. Till the time the US Commerce Department probe under Section 232 of the Trade Expansion Act into sectors crucial to nation security, including semiconductors, is still incomplete, iPhones made in India, as well as international smartphone exports to the US, will remain unaffected.
Even with the present temporary relief in place, the soon-to-be-completed probes are expected to impose tariffs on a wide range of products US sources from other countries. If the current scenario ends up getting flipped on its end, Apple will be left with no other resort but to minimise its reliance on other nations like India. The final result will only end up taking the shape of an expensive nightmare as locally-assembled iPhone could be pricier for US customers than where the prices stand now with international suppliers.
Bloomberg Intelligence analysts Anurag Rana and Andrew Girard were two such people to sound the alarm on foreboding implications of the 25% tariff on India. “Apple’s US iPhone sourcing strategy from India to circumvent China tariffs could be meaningfully set back if tariffs in India extend to 25%. A 25% surcharge would most likely force Apple to revise this plan,” they said in a July 30 note.
Any reprieve possible?
The only positive outlook in place as of now is that the POTUS has a reputation of swaying from his prior proclamations time and time again. Even after announcing his 25% tariff decision on India, he maintained that discussions between the two nations were still ongoing.
“We’re talking to them now. We’ll see what happens,” he responded to a question about whether the United States had plans to negotiate with India after the new tariff imposition. “Again, India was the highest or just about the highest tariff nation in the world, one of the highest — 100 points, 150 points or percentages. So India was one of the highest in the world. They had 175 per cent and higher than that.”
In another comment, Trump took a jab at BRICS, saying, “We’re negotiating right now, and it’s also BRICS. They have BRICS, which is basically a group of countries that are anti-United States, and India is a member of that, if you can believe it.”
He went on, “As you know, Prime Minister Modi is a friend of mine, but they don’t do very much business in terms of business with us. They sell a lot to us, but we don’t buy from them. You know why? Because the tariff is so high.”