Analyst: Apple only slightly bruised by Trump tariffs

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Gene Munster estimates $200 billion U.S. tariffs on goods made in China would lower Apple’s 2019 revenues 5% and profits less than 1%.


From a note posted Sunday night to Loup Ventures subscribers:

  • In a Friday filing with the U.S. Trade Representative, Apple outlined how proposed U.S. tariffs on $200 billion of Chinese goods would impact Apple Watch, AirPods, Beats, and other smaller product lines.
  • While Apple does not break out the contribution from these products, we estimate they will account for 4% of revenue in FY18, and grow at 35% in FY19 reaching 5% of sales.
  • If passed, we believe these tariffs could lower the profitability of Apple Watch and AirPods by 10-20%, resulting in just under a 1% negative impact on Apple’s profits in FY19.
  • We believe, beyond 2 years, these tariffs will go away.
  • Apple may fractionally increase production in the U.S. over the next 5-10 years, but we expect the share of manufacturing in the U.S. to remain small (<10%). We estimate that about 5% of Apple’s manufacturing and assembly takes place in the U.S today.

My take: Good thing Apple’s filing didn’t mention the elephant in the room. (No, not Donald Trump; the iPhone.) Can you imagine how Mr. Market would have reacted to a 10-20% cut in iPhone profitability?