The Rundown - Deep Dive: Can Apple Survive Trump's 'Liberation Day' Tariffs?

Episode Date: April 5, 2025

Apple’s decades-long bet on China is facing its biggest test yet. With Trump’s new “Liberation Day” tariffs targeting global manufacturing hubs, Apple finds itself exposed — and investors are feeling it. This episode unpacks how Tim Cook’s supply chain masterpiece became the company’s biggest liability, and what it will take to unwind it. From Foxconn to $2,300 iPhones, this is the story behind Apple’s most fragile strength.The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for another weekend deep dive. Today, we are talking about Apple. The biggest company in the world, they're about to face their biggest challenge yet. Trump's Liberation Day tariffs just dropped like a bomb across the global economy this past week. And Apple is standing at ground zero because of their decades-long bet on China. Apple stock dropped 9% on Thursday suffering its worst day in five years. And the sell-off deepened on Friday. with Apple shares dropping another 7%. So in this episode, we're looking at how Apple's greatest

strength, their supply chain, just became their greatest liability overnight. And what impact is this global trade war going to have on Apple? Some analysts think we're headed for $2,300 iPhones. That's what we're talking about today? Let's dive in. When people talk about Apple, everyone focuses on the shiny stuff, the iPhones, the MacBooks, the flashy keynotes. But Apple's real secret sauce, is their global supply chain. And that all started when Steve Jobs came back to Apple in 1998. Back then, Apple was bloated, losing cash on the verge of bankruptcy. So Jobs did something radical.

He made a big bet not just on the design, but on a guy named Tim Cook. See, Tim Cook wasn't a flashy product guy, but he was a supply chain savant from IBM. And he specialized in managing global logistics. Tim Cook understood how to move parts and cut ways, kill inventory, and more importantly, how to scale. And Tim Cook made a huge decision 25 years ago. He began shutting down Apple's U.S. factories and moving everything overseas, especially to China. In 2001, Apple officially entered China, and they quickly formed a partnership with a then-unk-Nown

Taiwanese manufacturer, Foxcon. Now, these days, a lot of people have heard of Foxcon, their Apple's main menu. manufacturer in China, you know, Foxcon's megafactories in Shenzhen can pump out millions of iPhones with Apple-level precision. And because of that relationship, today, 90% of Apple's manufacturing still happens in China. But these days, what was once Apple's competitive advantage has become a massive liability. Tim Cook's finally tuned supply chain machine was built for a world without trade wars. And unfortunately for Apple, that world doesn't seem to exist anymore. On Wednesday afternoon, April 2nd, President Trump came out to the Rose Garden of the White House and announced his new

tariff planned, and it was a bombshell. According to the new tariff rules, starting April 5th, there's going to be a 10% tariff on all imports to the U.S. But the major shocker was when Trump held up his infamous poster board that listed out the reciprocal tariffs that are going to be slapped on each country. Those percentages were way higher than anyone was expecting. China was being hit with a 34% tariff. That's on top of the existing 20% tariffs already in place, which means that Chinese imports are now facing a 54% tariff. But it wasn't just China feeling the pain. Trump also slapped tariffs on manufacturing hubs all across Asia. Vietnam got slat with a 46% tariff. Taiwan got slapped with a 32% tariff. India got slat with a 26% tariff. And the reason that's significant

is over the last few years, companies like Apple have been shifting some manufacturing out of China into those countries to avoid tariffs. Like during Trump's first term, Apple began shifting iPad and AirPods productions to Vietnam and some iPhone productions to India. But now, even those countries are being hit with tariffs, and there's no way for Apple to avoid them. And this news was especially brutal for apparel companies like Nike and Lulu Lemon, which rely heavily on Vietnam. According to Bank of America, the percentage of U.S. apparel imports from China

has nearly halved since 2010, while Vietnam's share has more than. more than doubled. But getting back to Apple here, 75% of the revenues come from physical products. Almost all of them are built overseas. So these tariffs are going to have a substantial impact on their bottom line. According to Cohen, every 10% tariff on imports from countries like China, Vietnam, or India cuts Apple's profits by about 3.5%. And Morgan Stanley estimates, these tariffs could add $8.5 billion to Apple's annual costs, which would reduce their profits by 7% next year. And guess what?

Apple's probably not going to absorb all those extra tariff costs. They're probably going to pass some of those onto the consumers, you know, people like you and me. That means that iPhones could get way more expensive. Ross Blatt Securities thinks that iPhone 16 Pro Maxes, which currently costs around $1,200, could end up costing $2,300 because of tariffs. And if iPhones do see a significant jump in price like that, well, many customers might just wait an extra year or two before upgrading.

So Apple's kind of stuck here. raise prices and lose potential sales, or just eat the cost? But that begs the question, why is Apple so dependent on overseas manufacturing anyways, especially China? Why not manufacturer in the U.S.? Well, the answer to that question has more to do than just cheap labor cost. Let's talk about it. So now with tariffs being slapped on every country,

why doesn't Apple just start making iPhones in the U.S.? See, the reality is even if Apple wanted to, it would probably take them over a decade to set up their manufacturing here. The reason for that is because China's manufacturing ecosystem has become incredibly specialized and efficient over the last few decades. They have the skills and capabilities that other countries, including the U.S., just don't. Even countries like Vietnam and India can't make iPhones at the scale that China can. Apple CEO Tim Cook explained the reason why in a now infamous clip from 2018. Take a listen.

There's a confusion about China. And let me at least give you my opinion. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low labor cost country many years ago. The reason is because of the skill, the quantity of skill in one location and the type of skill it is. Like the products we do require really advanced tooling and the precision. that you have to have in tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here.

In the U.S., you could have a meeting of tooling engineers, and I'm not sure we could fill the room. In China, you could fill multiple football fields. It's that vocational expertise is very deep, very, very deep here. What Tim Cook is saying, that Apple can't just copy paste China's manufacturing expertise, to other countries like the U.S. Chinese factories, especially those run by Foxcon, have perfected the art of producing incredibly complex devices at enormous scale with minimal defects.

Building out that same level of expertise in the U.S. would take years, maybe even decades. It's not as simple as just moving machines. It's about moving and replicating an entire ecosystem. I mean, there's a reason why Foxcon's main campus is nickname iPhone City. The facility spans 1.4 square meters. It handles up to 500,000 workers during peak season with the flexibility to scale up or down iPhone production based on the launch cycles.

So the reality is, for the foreseeable future, there's just no place like China when it comes to manufacturing, especially the iPhone. So honestly, things aren't looking so great for Apple right now. But if there's one thing that Tim Cook knows better than supply chains, it's diplomacy. During Trump's first term, Tim Cook finessed his way into a tariff exemption back in 2019.

There were no tariffs placed on iPhones, and Tim Cook was also able to get tariffs removed on Apple watches. So Tim Cook seems to have a pretty good relationship with Trump. He even convinced Trump to visit an Apple factory in Texas. And during that visit, Trump said that when you build in the United States, you don't have to worry about tariffs. And I think that's exactly the play that Apple is trying to make again. Apple recently announced plans to invest a whopping $500 billion in the U.S. over the next four years,

including building a new factory in my hometown of Houston, Texas. Apple is also doubling their U.S. advanced manufacturing fund, and they're ramping up investments in AI and silicon engineering. So they're betting big that this might help them secure another round of tariff exemptions. The reality is Apple won't ever be able to move all of their manufacturing to the U.S. And at the end of the day, it just might come down to Tim Cook's ability to charm his way out of Trump's tariff torpedo. Or Apple just might be cooked. No pun intended.

Well, all right, guys, that's it for today's weekend, deep dive. Hope you guys enjoyed today's episode. If you did, don't forget to subscribe to the podcast, especially on YouTube and Spotify. We actually filmed these deep dives with video, and you can watch it on YouTube and Spotify. I highly recommend checking that out. And if you have any topics that you think we should cover on. on future deep dive episodes. Let us know in the comments.

Thank you guys again for listening. Shout out to Mike and Connor for all the help behind the scenes. And we'll see you guys back here on Monday.