Apple's (AAPL) 2025 couldn't be going worse. Its stock price is down 19% on the year, it's facing a Department of Justice (DOJ) antitrust probe, and it continues to face off with Epic Games over App Store purchases.
The company delayed its improved Siri until later this year and is still trying to catch up to competitors like Google (GOOG, GOOGL) and Samsung on the AI front. And last week, former Apple design chief Jony Ive announced he's working on a new consumer product with Sam Altman and OpenAI (OPAI.PVT). To top it all off, President Trump is now coming for the company's most important product: the iPhone.
Trump fired off a missive on his Truth Social account on Friday demanding that Apple build its iPhones in the US or face a 25% tariff. He later said the same terms apply to Apple rival Samsung.
"The combination of all these factors is arguably the biggest test, I think, Apple has seen in a very long time," TECHnalysis Research founder and chief analyst Bob O'Donnell told Yahoo Finance.
"It's creating a series of question marks around a company that ... never really faced serious question marks for a long time."
Apple CEO Tim Cook, center, stands behind President Trump and Vice President Vance after the two were sworn into office at an inauguration ceremony in the rotunda of the US Capitol in Washington, D.C., on Jan. 20, 2025. (Shawn Thew/Pool via Reuters) ·via REUTERS / Reuters
The only person who can answer those questions is CEO Tim Cook. While he has navigated crises in the past, including COVID-induced supply chain crunches, the cavalcade of issues piling up for the iPhone maker will prove to be Cook's biggest challenge yet.
Trump's iPhone threats
Apple's most pressing threat comes in the form of Trump's threat to hit Apple's iPhone with a 25% tariff if Cook doesn't move production to the US.
"I have long ago informed Tim Cook of Apple that I expect their iPhone's [sic] that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else," Trump wrote in a May 23 Truth Social post. "If that is not the case, a Tariff of at least 25% must be paid by Apple to the U.S."
Apple largely avoided Trump's initial round of "Liberation Day" tariffs and subsequent increased levies on goods from China by shifting production of iPhones and other hardware to India, Vietnam, and other regions.
During the company's second quarter earnings call, Cook said the majority of US-bound iPhones in the current quarter will come from India, and almost all iPads, Macs, Apple Watches, and AirPods will come from Vietnam. Though he added that Apple would still take a $900 million hit from tariffs in the current quarter.
President Trump threatened 25% tariffs on Apple's iPhones. (Image: Truth Social) ·Truth Social
Building an iPhone in the US would not only require a Herculean effort to pull off during Trump's term but also add hundreds of dollars to iPhone prices.
"The reality of Apple being able to do any manufacturing of iPhones in the US is extraordinarily unlikely. And even if they made their best efforts ... it's like a five- to 10-year thing,” O'Donnell said.
"By the time they would want to move that kind of manufacturing to the US, it's all going to end up being roboticized," he added. "So it's just going to be robots in the US as opposed to people. It’s not like it's going to create all these huge numbers of jobs."
According to Morgan Stanley Research's Sharon Shih, an iPhone built in the US would likely cost 35% more than one built in China or India due to tariffs on iPhone components from China and the higher cost of labor in the US. That would send the cost of an iPhone 16 Pro from $999 to $1,350.
However, if Apple decides to accept the 25% tariff as is, Morgan Stanley's Erik Woodring estimates the company would only need to increase global iPhone prices by 4% to 6%.
But Trump's tariff threat is a transitory issue that could change at any given time. Apple's bigger problem is its slow start in the AI competition. The company rolled out its Apple Intelligence platform in Oct. 2024, well after Google and Microsoft (MSFT) debuted their own AI services, and delayed the release of its enhanced version of Siri until later this year.
On top of that, Apple faces the prospect of a new consumer electronics challenger in the form of Ive and Altman's AI-centric device.
Apple CEO Tim Cook, left, and chief design officer Jonathan Ive look at the Mac Pro in the display room at the Apple Worldwide Developers Conference in San Jose, Calif, in June 2019. (AP Photo/Jeff Chiu, File) ·ASSOCIATED PRESS
"The piece that, if I'm Tim Cook, that keeps me up at night is the question around AI," Deepwater Asset Management managing partner Gene Munster told Yahoo Finance.
"And I think that the Ive announcement underscores that there are deep wallets predicting a seismic change in terms of how businesses and consumers use tech. And the force of that change, AI, is something that Apple has struggled with."
Apple has the opportunity to change the narrative around its AI offerings during its WWDC developer event on June 9. Apple is expected to show off the latest versions of its various operating systems, including iOS 19 and iPadOS 19, as well as the next iteration of its macOS.
Apple will also need to provide more information on when consumers can expect to get their hands on the latest version of Siri and ensure the software has been worth the wait.
The DOJ and Epic
Lurking in the background of all of this are Apple's ongoing legal battles with the Department of Justice and "Fortnite" developer Epic Games. The Justice Department filed its antitrust suit against Apple in March 2024, arguing that the company maintains an illegal monopoly over the smartphone market.
According to the antitrust suit, Apple harms consumers by making it more difficult for iPhone users to switch to competing products and to access competing services. The complaint also says Apple harms app developers by imposing restrictions on app creation and distribution.
A loss in the case could force Apple to open up its walled garden of apps and services, making it easier for users to access third-party hardware and services.
Apple is also wrapped up in the DOJ's antitrust case against Google's search dominance. That case, which Google lost, revolves around Google's various deals to keep its search empire ahead of the competition, including a $20 billion per year agreement with Apple that makes Google the default search engine on iPhones, Macs, and other devices.
If Google is forced to ditch that deal, it would put a significant dent in Apple's services business revenue.
Apple also continues to contend with the fallout from its antitrust legal fight with Epic Games, which found that while Apple wasn't violating antitrust laws, it had to provide app developers with a means of pointing customers to options to make app purchases outside of Apple's App Store, avoiding the company's app store fees.
But according to US District Judge Yvonne Gonzalez Rogers, Apple didn't do that. Instead, it began charging developers a new fee for purchases customers made in their apps outside of the App Store. Gonzalez Rogers is asking prosecutors to look into Apple's moves to review the alleged "cover-up."
It all adds up to a harrowing 2025 for Apple. And there's still plenty of the year left to go.
Sign up for Yahoo Finance's Week in Tech newsletter. ·yahoofinance
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
