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Apple has reported stronger-than-expected first-quarter profits but warned that escalating US tariffs could cost the company up to $900 million this quarter and are already reshaping its global supply chain.
Chief executive Tim Cook told analysts on Thursday that, while the financial impact of tariffs had so far been “limited” this year, the tech giant is preparing for a significant hit if trade policies remain unchanged.
“If current global tariff rates, policies, and applications hold for the rest of the quarter, and no new duties are introduced, we estimate the impact could add $900 million to our costs,” Cook said during the earnings call.
He also revealed a major shift in Apple’s production strategy, stating that the majority of iPhones sold in the United States are now expected to originate from India, as the company moves to mitigate its exposure to the volatile trade relationship between Washington and Beijing.
Although fully assembled smartphones have been temporarily spared the harshest of former President Donald Trump’s tariffs, many of the components within Apple’s devices are still subject to duties, creating a complicated and costly logistics puzzle.
“The more components are crossing borders, the more cost flows through to the device,” noted tech analyst Rob Enderle, describing the situation as “an expensive mess.”
Cook confirmed that while China remains Apple’s main production base for goods sold outside the US, Vietnam has taken over as the primary manufacturer for US-bound iPads, Macs, Apple Watches, and AirPods. Apple began diversifying its supply chain several years ago in response to mounting geopolitical and pandemic-related risks.
“We realised some time ago that having everything concentrated in one location was too risky,” Cook said. “We’ve since expanded parts of our supply chain, and that approach will continue.”
According to Canalys research manager Le Xuan Chiew, Apple also stockpiled inventory in anticipation of new tariffs and has increased production in India to cushion against future disruptions. Despite this, China still accounts for the bulk of US iPhone shipments, although its share is gradually declining.
Sales Slip in China
Apple reported quarterly revenues of $95.4 billion, buoyed by strong iPhone sales, with profits reaching $24.8 billion. The company saw robust performance in the Americas and Japan, which analysts say may be due to pre-tariff stockpiling.
However, revenue in China fell by 3%, disappointing expectations that government subsidies might boost consumer demand in the region.
Shares in Apple dropped by more than three percent in after-hours trading, as analysts focused on the longer-term implications of its supply chain overhaul.
“The real story is in Tim Cook’s plans to navigate these unprecedented trade challenges,” said Emarketer analyst Jacob Bourne.
He warned that Apple’s pivot to India “raises pressing questions about execution timelines, capacity limits, and potential cost increases that could squeeze margins or be passed on to consumers.”
