So much for that 10% tax on iPhones

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That’s one Apple headwind lifted, at least for 90 days.

 

To the extent that Wall Street took seriously Trump’s casual threat to impose a 10% tax on iPhones imported from China, the selling pressure on Apple should lift a bit when the markets open on Monday.

Apple will be spared the specter—raised Friday by Morgan Stanley’s Katy Huberty—of three “value destructive” worst-case scenarios for Apple:

  • Relocating final assembly plants out of China and replacing a million Chinese low-wage earners (“largely inconceivable”)
  • Raising the price of already pricy smartphones—by $60 to $160 for the iPhone XS, for example—cutting into unit sales and revenues.
  • Swallowing the tariffs, chopping anywhere from $1 to $2.50 off Apple’s 2019 EPS in Huberty’s estimate.

Apple is spared, for now. According to the White House, the trade negotiators agreed to a 90-day truce. (Ending April 1, Apple’s birthday, for those who care about such things.) Curiously, Xinhua, China’s state-run news agency, makes no mention the 90-day deadline its account of the truce.

My take: Has the market already discounted Trump’s negotiating bluster and priced it into the stock? We’ll find out Monday.

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