After suffering the sharpest decline of the seven tech giants, following the Trump administration's tariff missives on 2 April, Apple stock shot up 15% yesterday on revelations that "reciprocal" tariffs are now on ice for 90-days.
The market reacted euphorically to the news that Apple's production locations, which remain entirely outside the U.S. - in China, India, Japan, South Korea, Taiwan, and Vietnam – will be spared, at least for now the knock-on impact of tariffs.
While Apple, prior to yesterday, was on its worst four-day trading streak since 2000, Wednesday’s rally added more than US$400 billion to the iPhone manufacturer’s market cap, which now stands at just under US$3 trillion.
This marked Apple’s single best trading day since January 1998, when Apple’s market cap was around $3 billion.
China tariff overhang
Despite yesterday’s tariff reprieve, investors still have deep reservations about Apple’s outlook given that most of the company’s iPhones and other hardware products are still made in China, which was not exempt from tariffs on Wednesday.
Trump more than doubled down on China's tariffs, which increased yesterday from 54% to 125%.
Investors are also concerned about the double-whammy impact on Apple, following the 84% tariff on U.S. goods imported into China – the country’s third-largest market by sales.
Having diversified its supply chain to lessen its reliance on China in recent years, Apple could end up serving a large percentage of its U.S. customers from factories outside China – notably India and Vietnam - with lower tariffs.
While Trump expects tariffs to force companies like Apple to shift manufacturing from Asia to the mainland U.S., analysts and the company itself have made it clear this would not be possible.
No U.S. workforce
The problem with this assertion, according to experts, including Apple’s CEO Tim Cook is that the U.S. does not have the workforce of other nations where the vast majority of its electronics are currently made.
This effectively nullifies the vision presented by Howard Lutnick of Apple, and other tech companies, tapping into “the tradecraft of America” to get its products made.
“Remember the army of millions and millions of human beings screwing in little screws to make iPhones? That kind of thing is going to come to America,” Lutnick said.
“It’s going to be automated and great Americans – the tradecraft of America – are going to fix them, is going to work on them.”
Even as far back as 2010, Apple founder, the late Steve Jobs admitted that the U.S. lacked the quantity of highly trained personnel the company would need.
Apple had 700,000 factory workers employed in China, Jobs noted at the time, and that was because it needed 30,000 engineers on-site to support those workers.
“You can’t find that many in America to hire,” he said.
More recently, Cook reminded the market that companies like Apple rely on countries like China not for cheap labor, but for the quality of trained employees.
“The reason is because of the skill and the quantity of skill in one location, and the type of skill,” he said.
It’s understood that Apple is also planning to send more iPhones to the U.S. from India to offset the high costs of China's tariffs.
However, these measures are seen as a short-term stop-gap while Apple attempts to win an exemption from Trump’s tariffs, which Cook secured during the president’s first term in the White House.