Everything Apple said about tariffs

Tariffs were top of mind for Apple analysts and investors, who asked numerous questions about the levies on the company’s earnings call yesterday as they sought to understand just how much the ongoing trade war might affect the iPhone maker.

These tariffs, obviously, are top of mind for Apple as well, as CEO Tim Cook and other executives mentioned the word “tariff” 20 times on the call.

Many of Apple’s products are currently exempt from global reciprocal tariffs as they await different sector-based tariffs, so Apple’s calculations don’t include the 145% tariffs on China.

Here are some notable tariff mentions from Cook:

Tariffs haven’t yet impacted Apple’s finances much.

“For the March quarter, we had a limited impact from tariffs as we were able to optimize our supply chain and inventory. For the June quarter, currently, we are not able to precisely estimate the impact of tariffs as we are uncertain of potential future actions prior to the end of the quarter.”

Consumers didn’t rush to buy new iPhones to get ahead of tariffs.

“If you look at the March quarter, we don’t believe that we saw obvious evidence of a significant pull forward in demand in the March quarter due to tariffs.”

Real tariff damage will likely come in Apple’s FY Q3.

“Assuming the current global tariff rates, policies and applications do not change for the balance of the quarter, and no new tariffs are added, we estimate the impact to add $900 million to our costs.”

What happens beyond the June quarter is a big unknown.

“I don’t want to predict the future because I’m not sure what will happen with the tariffs, and there is the Section 232 investigation going on. And so, it’s very difficult to predict beyond June.”

Cook wouldn’t comment on whether Apple would push elevated costs to consumers.

“On the pricing piece, we have nothing to announce today. And I’ll just say that the operational team has done an incredible job around optimizing the supply chain and the inventory. And we’ll obviously continue to do those things to the degree that we can.”

Apple plans to keep diversifying its supply chain to combat tariffs.

“...we have a complex supply chain. There’s always risk in the supply chain. And so, I wouldn’t tell you anything different than that. What we learned some time ago was that having everything in one location had too much risk with it. And so, we have over time with certain parts of the supply chain, not the whole thing, but certain parts of it, opened up new sources of supply. And you could see that kind of thing continuing in the future.”

That means more products for the US market will be made in India rather than China.

“For the June quarter, we do expect the majority of iPhones sold in the US will have India as their country of origin and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch, and AirPods products sold in the — also sold in the US. China would continue to be the country of origin for the vast majority of total product sales outside the US.”

In addition to the comments on the earnings call, Apple also filed its 10-Q today, in which it made numerous additions to include tariffs among the company’s risk factors. (Previously, the company’s risk factors section didn’t even include the word “tariff.”) The document, edited by FactSet, shows additions from its previous 10-Q in green and deletions in red.

You can see all of the changes in the PDF below, but here’s a key passage that was added. The bolded phrases are just our emphasis:

“The Company has a large, global business with sales outside the U.S. representing a majority of the Company’s total net sales, and the Company believes that it generally benefits from growth in international trade. A significant majority of the Company’s manufacturing is performed in whole or in part by outsourcing partners located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam, in addition to sourcing from partners and facilities located in the U.S. Restrictions on international trade, such as tariffs and other controls on imports or exports of goods, technology or data, can materially adversely affect the Company’s business and supply chain. The impact can be particularly significant if these restrictive measures apply to countries and regions where the Company derives a significant portion of its revenues and/or has significant supply chain operations. Restrictive measures can increase the cost of the Company’s products and the components and rare earths and other raw materials that go into them or affect the availability of such components and rare earths and other raw materials, and can require the Company to take various actions, including changing suppliers, restructuring business relationships and operations, ceasing to offer and distribute affected products, services and third-party applications to its customers, and increasing the prices of its products and services. Changing the Company’s business and supply chain in accordance with new or changed restrictions on international trade can be expensive, time-consuming and disruptive to the Company’s business and results of operations. Trade and other international disputes can also have an adverse impact on the overall macroeconomic environment and result in shifts and reductions in consumer spending and negative consumer sentiment for the Company’s products and services, all of which can further adversely affect the Company’s business and results of operations.”