Apple needs a sharp rise in the price of the iPhone to offset the upcoming tariffs: analysts

If President Donald Trump decides to freeze tariffs on the remaining billions of Chinese products, Apple may need to dramatically increase the price of the iPhone to offset the higher cost of parts, according to Wall Street analysts.

"We estimate that a price increase of about 14% is needed to absorb the impact of a 25% tariff, while maintaining margins for all players in the market. supply chain, "said MJ Morgan in a note to customers on Tuesday.

The bank has broken down the costs of manufacturing and selling the iPhone XS without any duty, which is about $ 1,000, compared to what it would cost if a 25 % s applied to parts made in China. This would bring the retail price of the iPhone to $ 1,142, the firm calculates.

Although Trump did not decide to freeze tariffs on Chinese goods worth an additional $ 300 billion, the US Trade Representative's Office officially launched the approval process on Monday. The sooner the new rates could come into effect would be June 24th.

Transferring the production of the iPhone exclusively to the United States is an option for Apple, said Tuesday Bank of America Merrill Lynch. The bank estimates that the price of the iPhone will increase by 20% if 100% of the phone is made in the United States.

"We estimate that the incremental cost of manufacturing iPhones in the US could be 15 to 25% and that, if passed on to consumers, it could result in demand destruction," said Bank of America. in a note.

But J.P. Morgan said that Apple would be more likely to absorb the cost of tariffs and weigh on its revenues than to increase the price of the phone. The bank estimates that the total gross margin on the iPhone will decrease by 4% if Apple does not pass the costs of the tariff on its customers.

The Apple stock is down more than 11% since the start of the trade war on May 2nd.

– With the reports of Michael Bloom.