How Trump's Tariffs Affect the Tech Market

 How Trump's Tariffs Affect the Tech Market

Trump's tariffs, which came into force, provoked an economic storm that included all countries and markets, and the financial markets suffered losses amounting to trillions of dollars, and these effects are not far from the big tech companies that have had plenty of losses.

Economic Comparisons

Economists liken the crisis caused by Trump's tariffs to previous major economic crises, such as the “dot-com bubble” at the beginning of the current millennium, the global economic crisis in 2008, and the economic crisis that accompanied the coronavirus pandemic a few years ago.

Ongoing Effects

It is expected that the negative impact of Trump's tariffs will continue for an unknown period unless he retreats from them and the countries that decided to impose reverse duties pursuant to the principle of reciprocity, in what specialists describe as a “trade war.”

Broader Market Impact

The impact will not be limited to the stock market, cryptocurrencies, or oil and gold prices but will extend to the prices of goods and services, not only in the United States but in all countries of the world.

Losses in the Tech Sector

As for tech companies, the Big Seven US companies, symbolically known as the “Magnificent Seven” and including Apple, Amazon, Microsoft, Google, Nvidia, Meta, and Tesla, have recorded losses of more than two trillion US dollars since Trump announced those fees in the second of April until now.

Apple's Financial Struggles

Apple had the largest share of those losses, recording alone more than 770 billion dollars of losses that are still ongoing, and no bottom or end is known yet.

Implications for the iPhone

In light of the turmoil that Trump has created in the tech market, we will take the iPhone as a model to try to understand how Trump's tariffs could affect the most prominent tech product of the past two decades.

Price Increase Trends

Analysts have suggested that Apple's response to the fees will be more conservative than expected while trying to mitigate the direct impact on its customers.

Expected Scenarios

According to a new research note prepared by analyst Jeff Poe from GF Securities, there are two main scenarios expected for Apple's response to the fees:

Raise prices globally by a modest 3% to 6% to help cover additional costs within the US market.

Raising prices only within the United States by an even greater percentage, ranging from 10% to 19%.

Cost Absorption

Bo points out that the impact in both cases will be less harmful than some expected, due to his belief that Apple will bear the largest part of the costs itself, given the tight profit margins in the supply chain and high production costs.

Consumer Reactions

He added that Apple will not be able to charge these costs to its supply chain partners to a large extent, and it may hesitate to raise prices excessively in order to avoid a negative reaction from consumers, especially in light of the decline in demand for iPhones due to the delay in artificial intelligence improvements.

Forecasts and Concerns

For our part, we believe that these forecasts are the most reasonable and realistic, after some exaggerated estimates, which predicted that the price of iPhones would reach 2300 dollars, caused a lot of controversy.

Financial Strength

Given Apple's financial strength, it has the ability to absorb the new fees without resorting to sharp price increases and to avoid losing market share to competitors who may be willing to temporarily bear the additional costs in exchange for expanding their user base, which means that consumers may not face significant price jumps as previously feared.

Dependence on China

Apple is one of the companies most affected by the escalating trade war, due to its heavy dependence on manufacturing in China, which imposes large customs duties on it, as well as smaller duties on countries such as India, Vietnam, and Thailand, which are secondary production centres for the company.

Analyst Predictions

JPMorgan analysts had expected last week that Apple would raise the prices of its products globally by 6% to compensate for the impact of U.S. tariffs, while analysts at Barclays Bank said that the company would have to increase prices or face a 15% decline in the profitability of its shares.

Expected Price Increases

Analysts at UBS bank estimated that the tariffs could raise the price of the iPhone 16 Pro Max in the United States by about 350 dollars, which is an increase of almost 30% compared to its current price of 1199 dollars.

Manufacturing Alternatives

The iPhone 16 Pro Max is the top-of-the-range iPhone phone and is currently manufactured in China, making it vulnerable to the direct impact of new import duties.

In contrast, the price of the iPhone 16 Pro—currently sold at a price of 999 dollars—is expected to rise by only about 120 dollars if the company decides to manufacture this version in India, according to UBS analytics.

Manufacturing Policy Challenges

In the same context, analysts at Morgan Stanley Bank reported that Apple may incur additional costs of 34 billion dollars a year as a result of these fees.

Even as the company has sought to diversify manufacturing locations in recent years through what is known as “repositioning to friendly countries,” Loss of Distinction

The bank noted in its report that “the distinction between manufacturing in friendly countries and manufacturing in China effectively disappears after the announcement of mutual duties, as any product that is not manufactured in the United States will be subject to high import duties.

Future Price Predictions

Morgan Stanley predicted that Apple will have to raise the prices of its products in the US market by 17% to 18%, unless it receives possible exemptions from the US government.

Moving Manufacturing

As for if Apple decides to move manufacturing to the United States, a possibility that most supply chain experts exclude, analyst Dan Ives of the Wedbush group estimates that the price of one phone will be about 3,500 dollars.

Trump's Vision for U.S. Manufacturing

Against the background of talking about the rise in iPhone prices, White House spokeswoman Carolyn Leavitt confirmed that current President Donald Trump believes in the possibility of transferring the manufacture of products such as iPhones to the United States, noting that “Apple would not have invested such a huge amount if it did not believe in the possibility of implementing the project inside the country." This was a comment on Apple's recent plan to inject investments of 500 billion dollars into the US market.

Historical Context

The White House's statements reflect a different position from what Apple officials have emphasised for more than a decade, as Steve Jobs and Tim Cook stressed the difficulty of manufacturing iPhones and other company products inside the United States due to the lack of specialised technical competencies and appropriate infrastructure.

Tim Cook noted at the Fortune magazine Forum in 2017 that “China has not been a low-cost country for years, but it is still the best in terms of the abundance of advanced and precise technical skills required to manufacture the company's products.”

So far, there is still a state of anticipation and uncertainty about the future of the global economy in general and the technical market in particular in light of Trump's unexpected decisions and unprecedented policies, with which it is difficult to predict the fate of things in the near future as well as in the long term.