What Happened?
Shares of iPhone and iPad maker Apple (NASDAQ:AAPL) fell 3.8% in the morning session after the Trump administration's new tariffs (25% on Canadian goods and 10% on Chinese products) shook markets. While similar tariffs were set for Mexico, they have been delayed. But it doesn't help that Canada has already hit back with its levies on U.S. imports. Trump admitted in a social media post that Americans might feel the sting: "WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!)." The tariffs were imposed as part of measures to improve the U.S.'s trade gap with the rest of the world and also to tighten border security.
UBS analysts warned that Apple's profits could take a hit. "Without an offset to the 10% tariff on China, Apple's gross margins could drop by 100 basis points, cutting annual earnings per share by about 3%—just from iPhone sales," they said.
Bank of America analysts believe Apple might find a way around the tariffs, as it did during President Trump's first term when the company secured iPhone tariff exemptions. But this time, there's no clear sign Apple will get the same break.
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What The Market Is Telling Us
Apple’s shares are very volatile and have had 20 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 4.1% on the news that Jefferies analyst Edison Lee downgraded the stock's rating from Hold to Sell, and echoed concerns about weak iPhone sales. Lee expects AAPL to report revenue below consensus estimates when it officially reports earnings later in the month.
Similarly, Loop Capital downgraded shares of the iPhone maker from Buy to Hold, adding "Downgrading to Hold With Material Demand Reductions Ahead of iPhone 17." Overall, the sentiment highlights growing concerns about Apple's sales strength and dominance in the smartphone market.
Apple is down 7.2% since the beginning of the year, and at $226.27 per share, it is trading 12.6% below its 52-week high of $259.02 from December 2024. Investors who bought $1,000 worth of Apple’s shares 5 years ago would now be looking at an investment worth $2,934.
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