Apple investors and consumers are bracing for a potential shock: a significant price increase on the iPhone 16 Pro Max, Apple’s top-of-the-line smartphone. According to a recent UBS analysis, President Trump’s reinstated tariffs could drive up the price by as much as $350 in the US market. This represents a nearly 30% jump from the current retail price of $1,199. The impact extends beyond just the Pro Max; the iPhone 16 Pro might also see a price increase, though a smaller one, estimated at around $120, if manufactured in India.
This potential price surge comes at a time when consumers are already feeling the pinch of inflation. The news has sent shockwaves through the market, with Apple shares plummeting 20% over the past three trading days, resulting in a staggering $675 billion loss in market capitalization. The uncertainty surrounding cost-sharing with suppliers and the ability to pass on increased costs to consumers adds to the anxiety.
UBS analyst Sundeep Gantori highlights the considerable uncertainty surrounding the increased costs and how they will be absorbed. Apple, heavily reliant on Chinese manufacturing, is particularly vulnerable to these tariffs. China’s potential 54% tariff rate, before further increases were proposed, exacerbates this vulnerability. Even secondary production locations like India, Vietnam, and Thailand are not immune to the smaller tariffs imposed.
Other analysts share similar concerns. JPMorgan Chase predicts a 6% global price increase to offset the tariffs, while Barclays anticipates either a price hike or a significant 15% cut to Apple’s earnings per share. The extreme scenario, as predicted by Wedbush’s Dan Ives, involves a relocation of iPhone production to the US, which is widely considered infeasible and would lead to a mind-boggling $3,500 price tag.
Morgan Stanley’s analysis underscores Apple’s limited flexibility, estimating that the company could absorb an additional $34 billion in annual tariff costs. Even the strategy of diversifying production to other countries (friend-shoring) isn’t a complete solution, as these countries might also face tariffs. This leaves Apple with few options to mitigate the financial blow. The company might seek government exemptions, but the overall outlook remains uncertain and potentially devastating for both the company and its customers.
The situation is further complicated by the fact that Apple’s products are already considered premium-priced. A $350 price increase on their flagship phone could price many consumers out of the market, potentially impacting sales figures dramatically. This situation will undoubtedly be closely watched by both Apple’s competitors and the broader tech industry, as it highlights the significant challenges presented by escalating trade tensions.
