Apple still faces tariff risk with so much of its supply chain dependent on China.
Apple's stock joined the technology sector in an epic relief rally Wednesday as President Donald Trump took a softer stance on tariffs. But is the iPhone maker really due to get a big break?
Trump said Wednesday that he would pause big "reciprocal" tariffs on many countries, instead setting the rate at 10% for 90 days. But he excluded China from the mix - and in fact said he would raise the rate on Chinese-made goods to 125%.
"China remains the biggest X variable related to Apple and the broader supply chain," Wedbush analyst Daniel Ives said in a note to clients.
Estimates vary regarding just how reliant Apple's manufacturing operation is on China. Ives said the company produces and assembles 90% of its iPhones in China. CFRA analyst Angelo Zino pegged that at 85%. Other analysts have noted the company also manufactures products in countries like Vietnam and India, with potentially some flexibility to move things around.
A scenario where Chinese goods are tariffed at an even higher rate than previously announced doesn't seem like a positive development for Apple given its heavy presence in China and the complexities involved in meaningful production shifts.
Trump "has bet the farm on trying to get a better economic trading landscape" with China, said Brendan Connaughton, founder and managing partner of Catalyst Private Wealth, in an interview with MarketWatch. "From his perspective, it's something he is not backing away from, and to China's credit they are not backing away from it either."
Plus, Trump's move Wednesday was just a delay on tariff hikes. Countries will still be subject to 10% tariffs, and "we are still, without a doubt, a long way from having clarity," he added.
Despite all the talk by the Trump administration clamoring for Apple to move manufacturing to the U.S., the company is still going to be making its phones outside the U.S. for now, and that means Apple will need to either raise prices or take a hit to its margins as it works to adjust to the new reality.
That said, Apple shares rose 15.3% in Wednesday trading to record their biggest one-day gain since 1998. They're still off 11% from last Wednesday's close, before Trump announced his "liberation day" tariffs.
Technology stocks likely had been reflecting more than just fears about tariffs. Investors were also getting more and more worried about the prospect of a recession, which could limit people's ability to spend on expensive consumer electronics. By relenting, at least for a period, on many steep tariffs, Trump could be signaling that he's paying more attention to the economic effects of his policies. That may be a relief to Apple investors.
"Clearly, Donald Trump likes to watch the stock market, and clearly he reacted to this - and that's that," said Louis Navellier, founder of Navellier & Associates, in emailed commentary.
Plus, even if Trump continues his hardline stance on China, there's hope he might back down more permanently on other countries where Apple has a supply-chain presence. Expanding production in places where Apple already makes goods is probably simpler than branching out to new countries where the company doesn't have an established setup.
So while Apple investors celebrated on Wednesday, much uncertainty remains for the company.