No Need for iPhone Price Hikes: How Apple Can Save Itself Under Trump's Tariff Threat

TradingKey – With most of Apple’s (AAPL.US) iPhones manufactured in China and President Trump’s tariffs squarely targeting Chinese imports, concerns are mounting that iPhone prices in the U.S, could surge. However, analysts at Morgan Stanley have proposed a multi-pronged strategy to help Apple avoid passing these costs on to consumers: expand production in India, revamp its product lineup, and extend installment payment options.

To cushion the blow of impending tariffs, Apple reportedly chartered emergency flights to ship approximately 1.5 million iPhones—around 600 tons—to the U.S.

According to Bank of America, a 125% tariff on Chinese imports would exposeApple to a weighted average tariff rate of 65%, potentially increasing its cost of sales by $20 billion.  Rosenblatt Securities projects that, once the tariffs take effect, the base-model iPhone price in the U.S. could spike by more than40%.

Yet  Morgan Stanley analyst Erik Woodring suggests   Apple doesn’t necessarily have to raise prices to absorb the added costs. Instead, the company could accelerate production expansion in India and strategically adjust its iPhone product mix.

Last year,  the U.S. accounted for half of Apple’s global iPhone revenue, it the company’s most critical market. On the supplyside, around 70% of Apple’s products are currently manufactured in China, with India contributing  10%, the U.S. 5%, and the remainder spread across across Vietnam, Malaysia, South Korea, and other countries.

To fully neutralize the impact of U.S.-China tariffs, Morgan Stanley argues that t Apple would need to double its production capacity in India. Currently, Apple produces 30 to 40 million iPhones annually in India, with approximately 12 million units serving the local market.

From a product strategy perspective, Morgan Stanley recommends phasing out lower-storage iPhone configurations, which yield slimmer profit margins, while keeping pricing for certain modelsmodels unchanged. For example, Apple could launch a 256GB iPhone 17 Pro at the same price as the 256GB iPhone 16, eliminating the entry-level  128GB option.

Additionally, extending Apple’s existing 24-month installment plan to 36 months could make devices more affordable on a monthly basis, potentially sustaining consumer demand despite broader economic pressures.