Apple has managed tariffs so far, but Cook says it's tough to predict beyond June

CNBC

01-05-2025

Apple CEO Tim Cook, after nearly a month of anticipation from investors, on Thursday finally revealed how Apple was navigating the Trump administration's tariffs.
The company only saw a "limited impact" on tariffs between January and the end of March, Cook told investors on an earnings call for the company's second quarter results.
For the current quarter which ends in June, Apple is predicting about $900 million in additional costs for those tariffs — assuming nothing changes, Cook said. That surprised analysts who said on the call that they expected the costs to be higher.
The vast majority of Apple's products are "currently not subject" to Trump's tariffs, Cook said. But beyond June, he didn't say much.
"I don't want to predict the future because I'm not sure what will happen with tariffs," said Cook, adding that "it's very difficult to predict beyond beyond June."
Apple doesn't usually give a lot of details or guidance beyond the current quarter, but investors didn't like Thursday's lack of clarity. Apple shares fell as much as 4% in extended trading on Thursday despite the company reporting results that beat Wall Street expectations for revenue and showed strong sales growth for iPads and Mac computers.
"As we look ahead, we remain confident," Cook said.
Apple's uncertainty highlights how even a company with a reputation for world-class operations can get whacked by the unpredictability of the Trump administration's shifting tariff rates and dates.
Cook, who built his reputation in Silicon Valley as Apple's operations guru, discussed how the company has dealt with the tariffs to minimize their impact so far on Thursday. He praised his old division on a call with analysts.
"'l'll just say that the operational team has done an incredible job around optimizing the the supply chain and the inventory," he said.
Apple is currently sourcing American-bound products from India and Vietnam, Cook said. Those countries currently have 10% tariffs on them, and the company is sourcing Apple computers for rest of the world from China, which the Trump administration has hit with a 145% tariff rate.
Cook also said that Apple had built up inventory ahead of the tariffs, which would be reported as manufacturing purchase obligations in the company's filings with the Securities and Exchange Commission. Cook said there was no "obvious evidence" that consumers were buying more Apple products ahead of tariffs.
"We do expect the majority of iPhones sold in the U.S. will have India as their country of origin," Cook said. "Vietnam will be the country of origin for almost all iPad, Mac, Apple Watch and AirPods products sold in the U.S."
Apple will still pay higher 145% tariffs on some Chinese imports for AppleCare, its extended warranty program, and accessories, Cook said.
One issue for forecasting tariffs going forward is that both Vietnam and India are in line to get hit with hefty tariffs on imported goods as soon as July.
Trump previously targeted both countries under his "reciprocal tariffs" on April 2, but a week later, he paused the tariffs for 90 days. Apple expanded its supply chain to those countries in recent years as a hedge for its business, but the Vietnam and India strategy won't work if Trump's tariffs ultimately take effect.
Cook also mentioned the possibility that technology products such as semiconductors might receive additional tariffs under a process called a Section 232 Investigation.
Apple is not the only big tech company to get rattled by the Trump administration's tariffs.
Amazon finance chief Brian Olsavsky said Thursday that Amazon would offer a wider range of guidance because of tariff uncertainty, and he also alluded to the possibility of weakening consumer demand. Microsoft raised Xbox prices on Thursday, despite tariffs coming up just once on the company's Wednesday earnings call.
Apple didn't offer guidance for its profitable Services division on Thursday, but offered the same kind of top-line forecast that it has in previous quarters. Apple expects overall revenue to grow "low to mid-single digits" on an annual basis during the current quarter. Apple reported $85.78 billion in sales during the June quarter last year.
And at least during that quarter, Apple investors will know what to expect.