In 2018, Apple Inc., a global leader in consumer electronics, faced an unexpected challenge when the U.S. imposed tariffs on a wide range of goods imported from China, including a 15% tariff on consumer electronics. Relying heavily on Chinese suppliers for critical components, the iPhone alone was projected to see an additional cost increase of $75 to $100 per unit. With an estimated 66 million iPhones shipped from China to the US, Apple suddenly faced almost $ 5 billion in added costs on for their flagship product alone, and not even counting other products like iPads, or MacBooks, raising concerns over its pricing strategies, profitability, and competitive positioning.

Apple’s CEO, Tim Cook, acted quickly to explore options. Raising prices on flagship products would risk alienating Apple’s customer base, while absorbing the costs would directly impact profit margins. Additionally, Cook explored the possibility of relocating part of Apple’s supply chain to other countries, such as Vietnam and India. This would reduce dependency on China over the long term, but establishing reliable supply chains in new regions would also require significant investment and resources. Apple’s established relationship with Chinese suppliers had provided cost and efficiency advantages that would be difficult to replicate immediately elsewhere.

The tariffs created market uncertainty, leading to fluctuations in Apple’s stock price and investor concerns about the long-term impacts of the trade tensions on the company’s growth and stability. With potential future tariff escalations in mind, Apple, along with other U.S. tech giants like Microsoft and Amazon, has been shifting some of its manufacturing operations to India and Vietnam. By 2020, Vietnam had become a secondary hub for Apple, reducing its dependence on China.

Ultimately, Apple adopted a mixed strategy: absorbing part of the tariff costs, lobbying the U.S. government for some exclusions, diversifying its supply chain to reduce vulnerability, and making selective price adjustments. This case highlights the multifaceted challenges multinational corporations face when navigating rapidly changing international trade policies and it underscores the strategic complexities of balancing short-term financial stability with long-term competitive resilience.

Article written by Gerhard Apfelthaler and Agassy Manoukian