Apple is shifting more of its iPhone shipments to the US from India in an effort to navigate the financial shockwaves caused by a fresh round of tariffs imposed by President Donald Trump.
The tech giant’s share price has plunged 19 per cent over three trading days—the worst such drop in nearly 25 years—triggered by investor anxiety over escalating costs from new tariffs on Chinese goods, as reported by The Wall Street Journal.
Facing tariffs of up to 54 per cent on Chinese exports, Apple is turning to India, where the reciprocal rate is 26 per cent. The move is designed as a short-term hedge while Apple seeks tariff exemptions, though the company is not yet overhauling its China-centric manufacturing network, which remains vital to its global supply chain.
India emerges as Apple’s contingency manufacturing base
India, which has steadily become a more prominent manufacturing site for Apple since 2017, is now being positioned as a critical buffer against US-China trade tensions. As reported by The Times of India, Apple shipped five full cargo planes of iPhones and related products from India to the United States in the final week of March, anticipating the tariff hike that took effect on April 5.
According to Bank of America analyst Wamsi Mohan, Apple had been on track to produce 25 million iPhones in India this year, with around 10 million intended for the local market. By redirecting these units to the United States, Apple could cover nearly half of the American demand in 2025 without relying heavily on Chinese factories, where increased tariffs could add $300 to the cost of an iPhone 16 Pro.
Tariff gaps create manufacturing incentives
Apple’s strategy is grounded in hard economics. The tariff differential between India and China—a 28 percentage-point advantage in favour of India—makes the South Asian nation a more attractive alternative, even though its manufacturing base is not yet as deeply integrated or efficient as China’s.
Vietnam, previously seen as another major alternative, has become less appealing under the new policy. Tariffs on Vietnamese exports to the US have soared to 46 per cent, nearly on par with those on Chinese goods. This further solidifies India’s role as Apple’s safest manufacturing alternative, especially for high-volume, high-value products like the iPhone.
Cost Pressures vs consumer demand
The tariff increases are not just a supply chain challenge—they are also a pricing dilemma. According to TechInsights as referred to by The Wall Street Journal, the hardware cost of an iPhone 16 Pro is currently around $550. A $300 tariff could push this figure to $850, potentially eroding Apple’s profit margins or forcing retail price hikes.
To avoid immediate consumer backlash, Apple has reportedly stocked its US warehouses with inventory produced under the old tariff rates. This “stockpiling,” confirmed by Indian officials in The Times of India, allows Apple to keep current pricing stable temporarily, even though the new tariffs are already in effect.
However, experts suggest that a broader, longer-term price adjustment could become inevitable if production costs remain elevated. With Apple drawing nearly 50 pecent of its revenue from the iPhone, any reduction in sales due to price sensitivity could have significant financial implications.
Complexity of decoupling from China
Despite efforts to diversify, Apple remains heavily dependent on Chinese manufacturing infrastructure. As reported in The New York Times, nearly 90 per cent of iPhones sold globally are still made in China, where the company benefits from an unparalleled ecosystem of suppliers, government incentives and a vast skilled labour pool.
Apple’s long-time manufacturing partner, Foxconn, operates massive assembly facilities in China that are unmatched in scale or efficiency. According to Apple’s internal assessments, even considering tariffs, shifting production to the US is not viable. Wedbush, a financial research firm, quipped that Americans would have to accept $3,500 iPhones if production were moved stateside.
Apple’s earlier attempts to produce Mac computers in Texas ran into logistical hurdles, including labour shortages and supply chain inconsistencies. Chief Executive Tim Cook himself noted that the US lacks the skilled tooling engineers needed for large-scale, advanced manufacturing.
Trump’s tariff strategy and Apple’s political manoeuvering
Trump’s renewed tariff campaign—designed to rebalance what he perceives as unfair trade practices—has blindsided multinational firms. Apple, in particular, is caught in the crosshairs. The Trump administration’s policy now enforces tariffs on all countries that impose fees on American exports. India and Vietnam, both of which have high import duties on US goods, are now facing “reciprocal tariffs” of 26 and 46 per cent respectively.
During Trump’s first term, Apple secured several exemptions thanks to behind-the-scenes diplomacy and public gestures, including Cook’s participation in a 2019 tour of an Apple facility in Texas. These efforts helped Apple avoid tariffs on flagship products like the iPhone and Apple Watch. However, the current administration appears less inclined to grant exceptions.
As outlined by Morgan Stanley and cited in The New York Times, the new tariff regime could cost Apple an additional $8.5 billion annually. Without exemptions, that equates to a hit of approximately $0.52 per share in earnings or 7 per cent of next year’s profit—figures that triggered the historic sell-off in Apple stock last week.
India’s strategic leverage in Apple’s global ambitions
India’s growing importance to Apple goes beyond immediate tariff advantages. As one of the world’s fastest-growing smartphone markets, India offers both a manufacturing base and a major consumer base. The Indian government has also been receptive to Apple’s investment supporting the company’s plans to gradually expand production capacity and create tens of thousands of jobs.
Apple’s manufacturing ramp-up in India began with older models but has since expanded to include its latest devices. This ensures that iPhones assembled in India meet the “substantial transformation” criteria, allowing them to be officially labelled as Indian exports. This is essential for tariff classification and underscores how supply chain semantics play a key role in trade economics.
While Vietnam remains a hub for accessories like AirPods and iPads, India’s role in core iPhone production gives it unique strategic value. According to The Times of India, Apple already drives the majority of India’s nearly $9 billion smartphone export industry to the US and this number is likely to rise as global trade tensions continue.
Policy, profit and production
Apple’s current approach—bolstering Indian shipments while lobbying for tariff relief—reflects a careful balancing act. The company is trying to shield consumers from higher prices, preserve its profit margins and maintain political goodwill on both sides of the trade war. Whether Apple can successfully transition a larger portion of its supply chain to India without compromising on efficiency, cost or quality will shape its competitive position in the years to come.
REUTERS
