Apple hit with $900M tariff, shifts iPhone supply to India

Apple reported a first-quarter profit that surpassed expectations on Thursday but warned that U.S. tariffs could cost the company $900 million in the current quarter and disrupt its supply chain.

CEO Tim Cook told analysts on an earnings call that Apple expects U.S. tariffs to add $900 million to its costs, though their impact was "limited" at the start of the year.

"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," Cook said. "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."

The U.S. and China have exchanged high tariffs in a tit-for-tat trade war, with China imposing retaliatory barriers on U.S. imports. While high-end tech products like smartphones and computers are temporarily exempt from U.S. tariffs, not all components used in Apple devices are spared, according to independent tech analyst Rob Enderle.

"The more components are crossing borders, the more cost flows through to the device," Enderle explained. "In the end, this all adds up to an expensive mess."

Canalys research manager Le Xuan Chiew said Apple built up inventory ahead of the tariffs going into effect and may shift more U.S.-bound production to India to minimize exposure to future risks.

"With ongoing fluctuations in reciprocal tariff policies, Apple is likely to further shift U.S.-bound production to India to reduce exposure to future risks," Chiew said.

Though iPhones produced in China still account for most U.S. shipments, Canalys noted that production in India ramped up toward the end of the quarter. Cook added that Apple would source almost all iPads, Macs, Apple Watches, and AirPods sold in the U.S. from Vietnam.

"We learned some time ago that having everything in one location had too much risk with it," Cook told analysts. "So we have, over time with certain parts of the supply chain, opened up new sources of supply. You could see that kind of thing continuing in the future."

Apple’s quarterly revenue totaled $95.4 billion, driven by strong iPhone sales, including $17 billion from the China market. Profit for the quarter reached $24.8 billion, though shares dropped more than 4% in after-market trading.

"The real story is in Tim Cook's plans to navigate these unprecedented trade challenges," said eMarketer analyst Jacob Bourne.

Bourne also raised concerns about the company's shift to India, noting that such a move raises questions about execution timelines, capacity limitations, and potential cost increases. These could shrink profit margins, pass costs to consumers, or have a mix of consequences, he said.