Trump can bluster and bluff all he wants, but iPhone manufacturing isn’t coming to the US

US President Donald Trump can huff, puff, and threaten to blow Tim Cook’s house down with a 25 percent iPhone import tariff, but analysts say even that threat is unlikely to bring Apple’s manufacturing home.

In response to Trump’s statement last week, analysts from Morgan Stanley published a research brief on Tuesday that concluded Apple is unlikely to respond to Trump’s latest tariff threat in a way that will please him. 

The report, provided to The Register, concluded that the original 145 percent tariff imposed by Trump on certain imports from China last month might have made Apple budge on the matter, but since the President lost his international staredown and promised to reduce that rate, the economics no longer make sense for Cupertino.

According to the Morgan Stanley number crunchers, an iPhone manufactured in the United States would be at least 35 percent more expensive than one made overseas when accounting for tariffs on single-source components still made in China and higher US labor costs. That means a $999 iPhone would be $1,350 – at a minimum – if Apple wanted to retain a similar gross margin.

[A] 25 percent tariff will have no effect; it will need to be many times higher to compensate for the local production cost

With a 25 percent tariff on iPhone imports from China or India in place, on the other hand, Apple would need to increase prices on iPhones by only four to six percent globally to keep profits up. 

Canalys smartphone and IoT analyst Runar Bjorhovde agreed with Morgan Stanley’s analysis in an email to The Register. “[A] 25 percent tariff will have no effect; it will need to be many times higher to compensate for the local production cost,” Bjorhovde told us. 

In other words, nice try, Mr. President, but those threats will need to be more serious. 

It’s not just retail margins standing in the way
In further comments on LinkedIn looking at what it would take for Apple to onshore iPhone production for the US market, Bjorhovde also agreed that there’s a lot more to the picture than tariffs.

If Apple decided to cave to Trump’s demands, it would have to build new US factories, train a bunch of new workers to manufacture iPhones, and deal with “surging assembly and testing costs” in addition to the aforementioned labor and component costs, said Bjorhovde. 

Factor all that in, says Morgan Stanley, and we’re looking at a minimum of two years before Apple could build, equip, staff, and start assembling iPhones at a new US-based greenfield plant. Apple would need more than one factory to meet US iPhone demand, Morgan Stanley predicted, and would have to find more than 100,000 people “skilled in highly precise tooling equipment” to meet peak-period demand. 

“Both of these facts present significant challenges in time to market,” Morgan Stanley said. 

More realistically, the investment bank said, it would take four or more years to get production going if we consider the case of TSMC’s new Arizona chip fab. That facility began construction in 2020 and only came online late last year, Morgan Stanley noted. 

If an Apple commitment followed the same timeline, the first US-built iPhone might not reach consumers until after President Trump leaves office

“If an Apple commitment followed the same timeline, the first US-built iPhone might not reach consumers until after President Trump leaves office,” the bankers concluded – perfect timing for the next White House occupant to take credit.

Bjorhovde is even less optimistic. 

“I think we will look at a three-to-five-year investment minimum to get any production capacity to the US,” the Canalys analyst told us, and even that timeline comes with a number of caveats. Most notably, Apple would have to find a way to import iPhone manufacturing experts from China to the United States “backed by an investment from, for example, Foxconn,” Bjorhovde said. 

Let’s not forget that Trump can’t simply wave his hands and implement targeted tariffs, either. Morgan Stanley pointed out that smartphones are currently exempted from Trump’s various on-again, off-again tariff decrees, giving the US just two options to enact Trump’s weekend decree. One option is through the International Emergency Economic Powers Act, which gives the President the power to levy tariffs if a national emergency is declared. The second comes through a section 232 study, which seeks to establish national security risks of manufacturing stuff outside the US.

“Both options face legal headwinds,” Morgan Stanley said. “A Section 232 investigation could have firmer standing given the administration is already evaluating semiconductor tariffs via this route.” 

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Will the Cook still crumble to political pressure?
Steve Jobs said it, we’ve said it, and we’ll say it again: iPhones just aren’t ever going to be a made-in-the-USA product. That doesn’t mean Apple won’t try to do something else to appease Trump, though. 

If Apple ignores Trump’s 25 percent tariff and declines its accompanying demand to bring iPhone manufacturing to the US, “Tim Cook’s status with the current administration [will] deteriorate,” Morgan Stanley predicted. Apple may also face further tariff threats, the bank predicted, which could further worry spooked investors.

Apple has already pledged to invest $500 billion in the US over four years, spanning areas like AI, chips, and workforce training, but not iPhone manufacturing, signaling it’s still willing to play ball with Washington. Morgan Stanley predicted it might do more that doesn’t involve messing with the margins on its top product. 

Morgan Stanley believes it would make sense for Tim Cook to announce reshoring some “smaller products,” suggesting Macs, HomePods, AirTags, and other products could be made in the US with much less investment. 

It’s “not as symbolic as the iPhone,” Morgan Stanley said, but it would be a win for both Trump and Apple. The former “gets the largest electronics company in the world to commit, publicly, to new US production,” the bank noted, while Apple reduces “geopolitical threats at home.” 

Apple didn’t respond to questions for this story. ®