US tariffs could raise Apple product prices and squeeze suppliers: CLSA research

New US tariffs are expected to increase shipping costs for Apple products, potentially leading to higher retail prices, according to a research note by CLSA, as reported by MKTNews. The report added that companies supplying components to Apple may see a dip in profitability due to reduced operational efficiency under the new trade conditions. However, because these suppliers typically operate on already narrow margins, CLSA believes they are unlikely to absorb the added tariff costs directly.

The analysis followed the recent implementation of a 10% tariff by the US government, which became the standard rate for most trading partners last Saturday. Though lower than the Trump-era tariffs, ranging from 20% to 25% for countries like the EU, Japan, and South Korea, the new rate still represents an increase over earlier, often lower, duties that were either minimal or waived under previous trade agreements.

Apple, which relies heavily on a global supply chain with critical components sourced from Asia, could be particularly vulnerable to the changes. Rising costs in shipping and production may be passed on to consumers, potentially affecting sales if prices rise significantly. Meanwhile, suppliers may be forced to absorb secondary impacts such as increased logistics costs or slower turnaround times, adding more strain to their already tight margins.

The new tariffs are part of a broader shift in US trade strategy aimed at promoting domestic manufacturing while tightening controls on foreign imports. While the Biden administration has positioned the 10% tariff as a middle-ground approach, less punitive than under Trump but more protective than pre-2018 standards, industry watchers are keeping a close eye on how companies like Apple and its suppliers adapt to the evolving trade environment.

Earlier, a report by CLSA stated India's tech hardware industry is expected to gain a competitive edge as new U.S. tariffs on electronics imports from key countries reshape global supply chains. The brokerage noted that the smartphone manufacturing segment, in particular, stands to benefit from the shift.

The US has recently imposed steep tariffs ranging from 25% to 125% on electronics imports from China, Mexico, and Vietnam, countries that together account for 51% of US electronics imports. Among these, smartphones make up $51 billion of the total, with China, Vietnam, and India being major sources, CLSA said. Prominent global smartphone brands such as Apple, Samsung, and Motorola already operate assembly lines in India.

With China facing a 125% tariff and Vietnam a 46% levy, India's comparatively lower 26% rate makes it a more attractive hub for production, the report said. CLSA highlighted that India's growing cost competitiveness is further supported by its large domestic market and the Production Linked Incentive (PLI) scheme, which promotes greater backward integration in manufacturing.

However, the report also cautioned that India’s advantage may face challenges. Brazil, which is subject to only a 10% tariff, could emerge as a strong competitor in electronics manufacturing. Moreover, trade negotiations, such as Vietnam's offer to eliminate all tariffs on U.S. imports, could impact India’s relative appeal as a supply chain destination.