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With new tariffs being imposed by President Donald Trump on Chinese goods at the beginning of April, Apple Inc AAPL and NVIDIA Corporation NVDA saw their stocks decline. However, the latest tariff relief has been a blessing in disguise for these tech behemoths, helping them prevent higher import costs and product price rises. This has prompted speculation on which stock to invest in. Let’s explore –
Apple Stock Remains Risky Bet, Even With Tariff Exemptions
President Trump’s steep tariffs on goods produced and imported from China could have disrupted Apple’s supply chains as severely as during the COVID-19 pandemic. However, Apple breathed a sigh of relief after the Trump administration exempted electronic devices like smartphones and computers from reciprocal tariffs.
Before the tariff exemption, Apple planned to increase iPhone production in India, which is subject to lower levies, while also securing its supply chain. Apple intends to produce over 30 million iPhones in India, satisfying a significant portion of American demand, which constitutes a third of global demand.
However, Apple is manufacturing its upcoming iPhone 17 in China, which will be launched soon. Shifting the production base to India or another location in a short time will require a herculean effort. It may also lead to retaliation from China, which has set up inquiries into U.S. companies and may create difficulties for Apple through its customs processes.
A complete breakup from China would be improbable as Apple produces the bulk of its iPhones in China, and there is a dearth of required skills to manufacture iPhones in the United States at the moment. Instead, Apple argued that the United States should boost semiconductor production and revive high-value job opportunities.
However, the tariff relief is temporary, and if no breakthrough occurs soon, it may impact Apple’s near-term profitability. President Trump said that relying on China for vital tech goods like smartphones and semiconductors isn’t acceptable. If tariffs are imposed, iPhone prices will rise, impacting American consumers and Apple’s sales volume. Anyhow, some tariffs still apply to goods imported from China and there may be sectoral tariffs on goods that have semiconductors, which can further affect Apple’s stagnating revenues.
Given the supply-chain risks, stagnant revenues and tariff uncertainties, Apple isn’t a favorable stock choice currently. Moreover, according to the price/earnings (P/E) ratio, Apple stock trades at 27.4X forward earnings. In comparison, the Computer - Micro Computers industry’s forward earnings multiple is 26.05. The Apple stock, therefore, is overvalued and may plummet if tariff issues remain unresolved.