That may sound like the title of a low-rent love song, but it's actually a top-tech stock analyst's brutal assessment of how President Donald Trump's saber-toothed tariff program is going slice into Apple's (AAPL) bottom line.
Markets continued to tumble at last check, and Apple shares in particular were down 5%. The Cupertino, Calif., tech giant's stock is off nearly 29% from January.
"The tariff economic Armageddon unleashed by Trump is a complete disaster for Apple given its massive China production exposure," said Wedbush analyst Dan Ives in a note to investors. "[No] US tech company is more negatively impacted by these tariffs than Apple, with 90% of iPhones produced and assembled in China,"
That Armageddon could be geddon even worse for Apple as Trump threatened an additional 50% tariff on China unless Beijing lifts its retaliatory duties on U.S. exports by April 8.
Apple CEO Tim Cook is contending with Donald Trump's tariff announcements.
Trump says 'don't be weak!'
"Don’t be Weak!" Trump declared in a social media post. "Don’t be Stupid! Don’t be a PANICAN (A new party based on Weak and Stupid people!). Be Strong, Courageous, and Patient, and GREATNESS will be the result!"
Ives and his team weren't getting that greatness vibe at all.
The investment firm's analysts saw Apple navigate extremely uncertain times in the supply chain during the Covid pandemic. And at the time, the firm said, it was feasible to look beyond the March or June 2020 quarters "and understand and value what normalized 2021 earnings could look like as normalization would happen."
"This tariff situation is dramatically different and a very scary prospect as the current tariff slate, with China at 54% and Taiwan at 32%, would be devastating to Apple, its cost structure, and ultimately consumer demand. ... [It's] not a debate...," Ives said.
Ives said that Apple, which is slated to report quarterly results next month, has become the world's most successful consumer products company, and the most valuable, with an installed base of 1.5 billion iPhone users and 2.4 billion devices driven by the iOS operating system.
The innovation and designs Cupertino has mastered are built in manufacturing facilities in China. Foxconn produces iPhones, iPads, Macs, AirPods and other hardware that Apple sells to consumers globally, including many in the U.S., he explained.
"While Apple has diversified its supply chain to other parts of the world including Vietnam, India, and the US ... the hearts and lungs of the Apple supply chain are cemented in Asia," Ives said. "We estimate the vast majority of iPhone production is out of China, over 50% of Mac products and 75% to 80% of iPads."
Since the debut of the iPhone X in 2017, Apple hasn’t increased the starting price of its flagship model from $999, Bloomberg's Mark Gurman reported. But with tariffs hitting Apple’s major sources of production, the specter of a price increase is back in a big way, he wrote.
The iPhone is Apple’s biggest seller, with first-quarter revenue totaling $69.14 billion, down 0.8% from a year earlier.
Analyst: Tariff consequences hard to model
When Trump imposed tariffs during his first term, Apple CEO Tim Cook persuaded the president to exempt the iPhone.
Apple also took steps to diversity its supply chain away from China, aiming to insulate itself from trade disputes with that country. That led to new production lines in India, Vietnam, Malaysia, Brazil and Thailand. The diversification efforts sped up in 2020 when Covid hit.
If this new world order is indeed here to stay, Bloomberg's Gurman wrote, "Apple at least has many ways to cope with it."
In February, Apple said it planned to open a new factory for artificial intelligence servers in Texas as part of a $500 billion investment in the U.S. Cook, who donated $1 million to Trump's inauguration, said at the time that "we are bullish on the future of American innovation."
"The reality is it would take three years and $30 billion in our estimation to move even 10% of its supply chain from Asia to the U.S. with major disruption in the process," Ives said.
For U.S. consumers the reality of a $1,000 iPhone being one of the best made consumer products on the planet would disappear, he said.
"It speaks to our point that if consumers want a $3,500 iPhone, we should make them in New Jersey or Texas or another state," he wrote. But "the concept of making iPhones in the US is a nonstarter ... at $1,000," Ives added.
The analyst, who slashed his price target for Apple to $250 from $325 while keeping his outperform rating, said he currently didn't expect most tech companies to give any guidance on the first-quarter conference calls over the next month, including Apple.
“The sheer uncertainty of this tariff announcement will cause demand destruction for consumers globally (recession fears, etc.) and the price consequences of this tariff action are hard to grasp and model," he said.
"We will adjust our numbers as the tariff policy changes/or sticks in this fluid time."
