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Apple (AAPL) won’t be able to flip a switch overnight and begin making iPhones in the US to appease the Trump administration.
Plus, moving the supply chain will come at a cost to consumers.
“What happens is you start to build on a certain place, and then the plastics company is built near where they are, and then the resistor company, and then the display company,” former Intel (INTC) CEO Pat Gelsinger said on Yahoo Finance’s Opening Bid podcast (see video above or listen below). “And so what happens is these other elements of the supply chains start to aggregate around the core elements of the supply chain, so they sediment into those locations. And that sedimentation takes decades.”
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Gelsinger called the effect “sedimenting.”
He added, “There will be cost associated with bringing supply chains back. It took decades for them to sediment away. They don’t return because you ask them to. They return because you’ve created economic incentives, capital, and capacity to drive their return.”
Read more: The latest news and updates on Trump’s tariffs
On April 9, the Trump administration announced a 90-day pause on all reciprocal tariffs except China. Tariffs on one of the US’s most important trading partners now stand at 145% — a 125% reciprocal tariff and the 20% Trump previously levied.
A 10% across-the-board duty is still being applied to all other imports.
The administration further refined its tariff plans on April 11.
The White House issued a rule that spared smartphones, computers, semiconductors, and other electronics from reciprocal tariffs, especially the harsher tariffs on Chinese goods. US Customs and Border Protection said the goods would be excluded from Trump’s 10% global tariff and the 125% reciprocal Chinese tariffs.
The administration said it’s eyeing a tariff on semiconductors.
For Apple, the tariff policy could drive up prices on products such as iPhones, Macs, and AirPods, experts say. That could stunt demand and continue to weigh on Apple’s stock, which is down 22% year to date.
“The tariff related cost headwinds, which are a non-factor with the exemptions, are unlikely to materially change the macro concerns in relation to the trade war between US and China driving a slowdown in both geographies, which are two key end-markets for Apple revenues,” JPMorgan analyst Samik Chatterjee wrote in a recent note. “Pullback in consumer spending on account of the slower macro is likely to influence revenues despite the exemptions driving more confidence in gross margin sustainability.”
