Tariff War and Increasingly Strangling iPhone Prices

Since the debut of the iPhone X in 2017, referring to Bloomberg, Apple Inc. has never changed the price of its flagship smartphone. The figure is still on the psychological threshold, which is 999 US dollars. Even if there is, the price burden occurs because there are variant embellishments, which are influenced by size and storage capacity.

However, now, triggered by the policies of US President Donald Trump, the price of your favorite iPhone model (the base model) will soon be much more expensive. Analysts say the policy will increase the price of the iPhone by 30-40 percent.

The cheapest variant of the iPhone 16 available in the US is now sold at a price of 799 US dollars or approximately Rp 13.513 million (1 US dollar = Rp 16,900). However, with the tariff increase, according to calculations by Rosenblatt Securities, the price could reach 1,142 US dollars or approximately Rp 19.29 million.

The highest variant, iPhone 16 Pro Max, which features a 6.9-inch screen and storage capacity of up to 1 terabyte (1000 gigabytes or GB), is currently sold at a price of 1,599 US dollars or approximately Rp 26.987 million. With the new tariff increase of 43 percent, its price could reach 2,300 US dollars or approximately Rp 38.978 million.

Would consumers be willing to dig deeper into their pockets? At the same time, wallets are not getting any thicker. Or, would producers bear part of the burden? This will be a challenging matter for Tim Cook, CEO of Apple, and his peers.

The turmoil surrounding Trump's tariff policy has caused turbulence in the stock market. The majority of stock prices plummeted drastically, including Apple shares, which closed down by 9.3 percent during the trading session on Thursday (3/4/2025). This is the worst decline since 2020.

During his first term, Trump imposed tariffs on imports of goods made in China to pressure U.S. companies to "return home," building their manufacturing facilities in the U.S. or neighboring countries like Mexico. Apple was among them. In fact, Apple received exemptions or relief for several products. However, this time, Trump has not granted any exemptions.

Currently, the majority of the 220 million iPhones sold globally are manufactured in China. Its largest markets are the US, China, and Europe. Beijing, in response to Trump's tariff policies, will impose a 54 percent tariff on products to be exported to the US. Although there is diversification in production locations, such as in Vietnam and India, these countries are also not exempt from Trump's tariff policies. Vietnam faces a levy of 46 percent, while India faces 26 percent.

In a note, Rosenblatt Securities analyst Barton Crockett said their expectation was that Apple, as a US icon, would be exempted. But that turned out to be far from the truth.

The new variant of the iPhone, the iPhone 16e, which was launched in February is priced at $599 or around Rp10,096 million. When added to the new tariff calculation, the price will jump to $856 or around Rp14,414 million. The prices of other Apple devices are also almost certain to experience a significant increase.

The smartphone competition has become tighter after several manufacturers incorporated artificial intelligence technology into their products. South Korea's Samsung and China's Huawei are two of Apple's current competitors.

It’s not easy for Apple to compete with them, especially in high-end products. Apple Intelligence and its accompanying features, such as summarizing notifications, rewriting emails and giving users access to ChatGPT, have failed to attract consumer interest.

Experts say these features, while innovative, are not encouraging potential customers to replace their old smartphones with new models. This situation will add pressure on management. Stagnant demand could hurt Apple's bottom line, especially if costs rise due to tariffs.

Angelo Zino, an equity analyst at CFRA Research, said the company would have a hard time passing on the extra costs of the tariff war of 5-10 percent to consumers. For now, Zino doesn't expect Apple to take drastic action, raising iPhone prices. "We expect Apple to hold off on raising prices until this fall when the iPhone 17 will launch," he said.

Neil Shah, analyst and founder of Counterpoint Research, Neil Shah, Apple needs to raise its prices by at least 30 percent to offset the import duties.

Crockett explicitly said that Trump's tariff policy could destroy Apple's business. Potential losses could reach 40 billion dollars.

Samsung, on the other hand, is in a better position because South Korea faces lower tariffs than China. This situation will be very difficult for Apple.

"It's hard for us to imagine Trump destroying an American icon," Crockett said. (Reuters)