Washington: In a significant escalation of his protectionist trade policies, U.S. President Donald Trump has issued a stern warning to Apple Inc., stating that iPhones sold in the United States must be manufactured domestically. Failure to comply would result in a minimum 25% tariff on iPhones produced abroad, including those assembled in India.
This announcement comes amid ongoing trade tensions between the U.S. and its global partners, with Trump emphasizing the need to bolster domestic manufacturing and reduce reliance on foreign production. Apple, which has been diversifying its supply chain by increasing production in India, now faces a challenging decision.
Apple's strategy to mitigate tariffs on Chinese-made goods led to a significant shift in production to India. In March 2025, 97.6% of iPhones exported from India were destined for the U.S., a substantial increase from 81.9% in the previous quarter. The company has also been rapidly scaling up its Indian manufacturing operations, with Foxconn's Chennai plant operating seven days a week to meet demand.
However, Trump's latest directive threatens to disrupt this strategy. Analysts warn that imposing a 25% tariff on iPhones manufactured outside the U.S. could significantly increase consumer prices, potentially raising the cost of an iPhone to around $3,500.
Apple's stock has already felt the impact, declining approximately 3% in premarket trading following the announcement. The company's valuation has dropped about 20% in 2025, making it the worst-performing stock among the so-called “Magnificent Seven.”
The tech giant now faces a complex dilemma: absorb the tariffs and risk reduced profit margins, pass the increased costs onto consumers, or undertake the costly and time-consuming process of relocating production to the U.S. Given the logistical challenges and the current lack of a skilled labor force for intricate manufacturing processes in the U.S., the latter option appears impractical in the near term.
As the situation unfolds, Apple and other multinational corporations will be closely monitoring the evolving trade policies and assessing their long-term manufacturing strategies.