Apple Inc. is feeling its way through the thicket of U.S.-China trade relations. They are especially concerned about the impact of rising tariffs on Chinese-based products. The company has subsequently made $900 million in investment pledges to court the Trump administration. It remains unaddressed on a host of other issues in establishing U.S.-based iPhone production.
In February 2022, Apple pledged to invest $500 billion and add 20,000 workers in the U.S. by 2028. This initiative directly supports a new $240 million data center in Houston, announced today, which will help perform exciting work in artificial intelligence. Whether or not it would even be possible to manufacture iPhones in the U.S. is another story.
Wedbush Securities analyst Dan Ives calls that prospect a “non-starter” for making iPhones in the U.S. He highlights that Apple’s extensive supply chain, developed in China since the 1990s, complicates any potential transition to domestic manufacturing. The U.S. tariff on imports from China today is at a historic high level of 145%. This step came with tremendous fiscal costs.
That underline the economic impact of today’s trade war and it’s showing already in Apple’s bottom line. Since President Trump’s administration began increasing tariffs on April 2, Apple’s stock price has plummeted by 15%, resulting in a market value loss of approximately $500 billion. Analysts are speculating that the company will have to increase prices on iPhones and other core products. They want these tariffs to help make that decision.
Continuing to almost double the U.S. manufacturing workforce—with billions in new factories—would take years. According to industry experts, creating factories to produce iPhones on American soil would take years. First, the predictions they make that things will cost billions of dollars. In fact, Apple CEO Tim Cook has repeatedly cited concerns about the readiness of manufacturing labor within the United States.
“In the U.S., you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China, you could fill multiple football fields.” – Tim Cook, Apple CEO
Apple took some steps towards increased domestic production, most famously beginning to assemble some Mac computers in Texas in 2013. This very small-scale effort stands in sharp contrast to the enormous scale required for iPhone production. Though at the time, President Trump tried to take credit for this Texas plant, it was started under the Obama administration.
We commend the Trump administration for keeping electronics such as smartphones out of reciprocal tariffs. What might this decision mean for changes to policy down the road. White House Press Secretary Karoline Levitt remarked on Apple’s commitment to U.S. investment, stating, “If Apple didn’t think the United States could do it, they probably wouldn’t have put up that big chunk of change.”
As Apple contemplates its future in a global marketplace heavily reliant on overseas supply chains, it must consider its options carefully. Their spinoff in China has brought in a staggering $96 billion in revenue last fiscal year. This monumental accomplishment further underscores just how important this market has become to the company’s fundamental success.
As Forrester Research analyst Dipanjan Chatterjee noted, Apple is well positioned to absorb cost increases from tariffs. This is because they could avoid short-term fiscal impacts from such policy shifts. While this short-term buffer should help, it will not resolve the long-term challenge of moving more production back from China.
U.S. Commerce Secretary Howard Lutnick expressed optimism about manufacturing jobs returning to America, stating: “The army of millions and millions of human beings screwing in little screws to make iPhones, that kind of thing is going to come to America.”
Even as Apple continues to navigate these complex challenges, it’s unclear whether a more robust move to domestic manufacturing will come to pass. The company’s conception of its production pipeline, with a global supply chain at its core—and the economic realities of producing in the U.S.—are powerful deterrents.
