Apple Inc (NASDAQ:AAPL, ETR:APC) shares dropped 7.5% in premarket trading on Thursday as investors reacted to concerns over new US tariffs on Chinese imports.
Analysts at Jefferies warn of a potential hit to the company's profits if exemptions are not granted.
"Apple supply chain stocks have been sold off, driven by the 54% reciprocal tariff the US is imposing on China," Jefferies analysts wrote in a note.
"We do not yet know if Apple will be exempted (it was exempted in 2018), but Apple's announcement on February 25 it would invest US$500 billion in the US over the next four years may help it get exemption."
Jefferies estimated that if Apple is not exempt and absorbs the full cost of the tariffs rather than passing them on to consumers, its net profit for fiscal 2025 could decline by 14%.
Apple was exempted from tariffs during Trump's first presidency.
There are 37 pages of items exempted from tariffs, including all semiconductor components, analysts noted.
Jefferies expects the company to accelerate efforts to shift production away from China regardless of whether the technology giant is granted an exemption.
"Even if Apple is exempted from the current tariffs, it will need to accelerate its supply chain diversification efforts, and thus needs to pay its suppliers better and give more share to those who could help Apple achieve this objective,” they wrote.
Currently, 15% of iPhones are assembled in India, compared with 85% in China, while about 33% of global iPhone sales go to the US, according to Jefferies.