U.S. stocks tumbled last week after President Donald Trump announced new tariffs on steel and aluminum imports. While the new tariffs may not have much of a direct impact on Apple, Inc. (Nasdaq: AAPL), an all-out trade war with China is a different story.
If the tariffs apply to finished products and not just raw materials, Loup Ventures estimates the price of iMacs and iPhones could rise by as much as 0.2 percent. That estimate is based on the amount of metal contained in the devices.
GBH Insights head of technology research Daniel Ives says no matter how the tariffs are applied, or whether Apple passes higher costs on to customers, the new tariffs will have little impact on Apple’s business.
[See: 6 Reasons to Love Apple Stock in 2018.]
“If the tariff is on finished products given the aluminum and steel inputs, this could add roughly $20 million to $30 million of costs to the production of Macs and iPhones in a given year, which is [akin to] a rounding error,” Ives says.
On the other hand, if the new tariffs ultimately spark a trade war between the U.S. and China, things could get serious for Apple and its investors. While many of the largest U.S. tech companies, including Alphabet ( GOOG, GOOGL) and Facebook ( FB) do very little business in China, Apple reported that more than 20 percent of its global sales in the most recent quarter came from the Greater China region, which includes Hong Kong and Taiwan.
Former Chinese vice minister of commerce Wei Jianguo said last week that China is prepared to fire back at the U.S. “China does not want to see a trade war with the United States,” Wei says in the Washington Post. “But if Trump insists, China is not afraid of it.”
Trump downplayed talk of a trade war on Twitter Friday, writing that “trade wars are good and easy to win.” Investors seemed to disagree, sending the Standard & Poor’s 500 index down 0.7 percent in the past two days.
Despite the potential for China to make an example of Apple, Ives remains bullish on the stock.
[See: 7 of the Best Stocks to Buy for 2018.]
GBH has a “highly attractive” rating and $205 price target for AAPL stock.
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Trade War Would Impact Apple originally appeared on usnews.com
