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Market on alert after Trump’s tariff threat adds to Apple rout

Analysts’ outlook on Apple (AAPL) has never been as dismal as it is now, and the sentiment is turning from bad to worse with each passing day. The stock lost nearly a quarter of its value after the downward spiral started last month.

As it entered the bear market, the average rating on the iPhone-maker oscillated between neutral and hold this month when a section of analysts stripped the stock of the buy tag. Already under pressure from the falling iPhone shipments, Apple encountered a fresh challenge this week after President Trump announced a 10% tariff on iPhones and MacBooks manufactured in China.

Apple Product's iPhone, iPad and Mac Unit Sales

Once implemented, the tariff will definitely eat into the company’s profitability, with some estimates hinting at a $1.5-billion impact. There would be a proportionate increase in costs if the government raises the import duty to 25% in the future, as warned by Trump. A steep hike in product prices at this juncture – to absorb the additional cost related to tariff – might drive away potential iPhone customers.

Considering the lukewarm market response to the latest models of the popular smartphone, the current slump is likely to stay for some time. While the broader market remains optimistic about Apple’s long-term prospects, the company would have a tough time tackling the crisis if Trump walks the talk.

And, its ripple effect will reflect in the operations of Apple’s suppliers who are already worried about the shrinking orders. The market values of the top suppliers took a beating recently after the outlook for the upcoming quarters was slashed.

Apple supplier Foxconn looks to cut costs and jobs in preparation for tough year

Apple came in Trump’s firing line apparently due to the company’s extensive dependence on China for production. The president has urged the Apple management on multiple occasions to bring the production of iPhone to the US. Trump’s announcement about his latest plans for Apple came weeks before the latest hike in tariffs on Chinese products, worth $200 billion, from 10% to 25% comes into effect.

Some market watchers are of the view that the president is threatening Apple with the import duty in order to bring CEO Tim Cook to the negotiation table and persuade him to loosen the company’s China ties.

 

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