Jefferies flags tariff risk to Apple margins

Investing.com -- Jefferies warned that new U.S. tariff threats could squeeze Apple’s margins on the iPhone 17, saying the tech giant may face a hit to earnings if imports from China lose their current exemption.

The brokerage trimmed its price target to $203.07 from $205.16, as President Donald Trump plans to impose an additional 100% tariff on Chinese imports from Nov. 1 would put pressure on Apple, which relies heavily on China for iPhone assembly.

Jefferies estimated Apple could see a 5% cut to its fiscal 2026 earnings per share if it had to pay a 130% tariff on about 9 million iPhone 17 units imported from China into the United States. Other products could also be affected if exemptions are removed, the note said.

Apple is unlikely to meet all U.S. demand from its Indian production base in the near term, making it more exposed if tariffs are enforced.

While investors may expect Apple to secure exemptions given its U.S. investment commitments, Jefferies cautioned that the company could face political pressure to shift more production onshore if tensions with China escalate.

Even without tariff, Apple’s latest iPhone lineup carries weaker margins due to product mix and higher costs.

It estimated the iPhone 17’s blended gross margin is 1.7 percentage points below the iPhone 16, with the base model making up a larger share of sales and the premium 17 Pro Max carrying higher bills of materials.

The iPhone 17 Air has the highest margin but is the weakest seller, muting its impact.

Jefferies’ fourth-quarter fiscal 2025 revenue and operating profit forecasts are about 4% below consensus. It expects Apple’s results to show little excitement, citing flat product revenue outside iPhones.

Shares of Apple are up 0.8% at $247.29 on Monday.

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