Apple projects tariff costs will hit $1.1B next quarter

Tariffs are projected to cost Apple $1.1 billion in the July-to-September quarter, an uptick from the previous period, CEO Tim Cook said during the company’s earnings call with investors Thursday. 

Those cost projections, which are based on current rates and policies, could end up lower than expected as they did in the previous quarter. Apple incurred about $800 million of tariff-related costs for the June quarter, less than the $900 million estimate the company shared in May. 

Cook said most of the tariffs levied against Apple stem from the International Emergency Economic Powers Act (IEEPA). Earlier this year, and amid a brewing trade war, the U.S. government and China agreed to a 30% tariff on imports from China. That trade agreement, which reduced “reciprocal” tariffs from 125% to 10% (plus the 20% duty against China related to fentanyl), stands until August 12.

While sales growth suggests fear of tariffs helped fuel sales, Cook downplayed the “pull forward” effect, noting that consumers were more motivated by the “strength of the product.”

“If you look at iPhone, the 16 family grew double digits, as opposed to the 15 family from the year-ago quarter,” Cook said on the call. “And so we did set an upgrade record … I think it directly is because of the strength of the product.”

Sales of the iPhone rose 13% year-over-year and generated $44.5 billion in revenue — nearly half of the entire company’s total revenue this quarter, which reached $94 billion. 

Still, tariffs have had an impact and may continue to do so, even if Apple shifts its manufacturing strategy to countries with lower tariffs.

Apple devices are mainly manufactured in India, China, and Vietnam. Nearly half the iPhones sold in the U.S. are produced in India, while Macs, iPads, and watches bound for U.S. customers are made in Vietnam. Both India and Vietnam are subjected to tariffs of 25% and 20%, respectively. 

President Trump previously expressed his dismay at Apple shifting its supply chain focus more toward India, threatening the company with a 25% tariff unless Apple moved iPhone production to the U.S. 

Cook reiterated Apple’s commitment to the U.S. in Thursday’s investors call, saying the company has committed $500 billion in investments to the U.S. over the next four years, building chips and semiconductors across the country.