Tariff Impact Analysis for Apple

Analysis

Following trade policy actions introduced in early 2025, Apple faced import duties under the International Emergency Economic Powers Act (IEEPA), including a 20% tariff on China-origin imports enacted in February 2025 and an additional 125% tariff on specific categories announced in April 2025, which raised China import rates on certain U.S. AppleCare and accessory products to at least 145%1. Crucially, Apple's core hardware lineup—including iPhone, Mac, iPad, Apple Watch, and Vision Pro—was not subject to the global reciprocal tariffs introduced in April 2025, as the U.S. Department of Commerce initiated an investigation under Section 232 of the Trade Expansion Act of 1962 into imports of semiconductors, semiconductor manufacturing equipment, and downstream products containing semiconductors1,2. In fiscal 2Q-2025 (March 2025 quarter), Apple experienced limited tariff exposure due to supply chain optimization and inventory build-ahead1.

Apple's mitigation strategy relied on geographical supply chain diversification and inventory management rather than end-consumer price increases1. Specifically, Apple adjusted production allocations so that for the U.S. market, the majority of iPhones imported had India as their country of origin, while Vietnam served as the country of origin for almost all iPad, Mac, Apple Watch, and AirPods units sold in the U.S., leaving China as the primary country of origin for sales outside the U.S.1. Management confirmed that no pricing actions were taken to offset elevated duties, absorbing tariffs into cost of sales1,2. Concurrently, Apple expanded its domestic commitments under its American Manufacturing Program, investing in semiconductor production across 12 states and entering a multi-year custom silicon agreement with Broadcom exceeding $30B3,4.

Despite supply chain realignment, Apple incurred discrete gross tariff costs across three consecutive reporting quarters. For fiscal 3Q-2025 (June 2025 quarter), Apple initially guided gross tariff costs of $900M1 and incurred approximately $800M in actual gross tariff-related costs3, contributing to a 60bps sequential decline in company gross margin to 46.5%3. For fiscal 4Q-2025 (September 2025 quarter), Apple guided and incurred approximately $1.1B in gross tariff costs3,5. For fiscal 1Q-2026 (December 2025 quarter), Apple guided and incurred approximately $1.4B in gross tariff costs5,6, reflecting seasonally higher product shipments partially moderated by a reduction in China IEEPA tariff rates from 20% to 10%5. Cumulatively, Apple incurred $3.3B in gross tariff costs across these three quarters3,5,6. In fiscal 2Q-2026 (March 2026 quarter), gross tariff costs declined sequentially due to seasonal volume reductions, a full-quarter benefit from reduced IEEPA rates, and the lower global rate under Section 122 of the Trade Act of 1974, though Apple did not disclose a discrete dollar figure for that quarter7. Because Apple did not quantify a specific mitigation offset against these gross duties, headline net cost impact is not derived from gross figures and is reported as null per reporting standards.

Trade policy and legal determinations in early 2026 altered Apple's tariff obligations and enabled the recovery of duties paid. On January 14, 2026, the Department of Commerce published initial findings of its Section 232 semiconductor investigation, which imposed no additional tariffs affecting Apple products8,2. On February 20, 2026, the U.S. Supreme Court struck down tariffs previously imposed under IEEPA9,2. Apple filed for tariff refunds through U.S. Customs and Border Protection and recognized refunds received as a reduction of products cost of sales2. In fiscal 3Q-2026 (June 2026 quarter), tariff refunds contributed a favorable impact of approximately 2 percentage points (200bps) to company gross margin (reporting at 50.1%), over 2.5 percentage points (250bps) to products gross margin (40.1%), and $0.11 to diluted EPS ($2.02)4,10; excluding this one-time refund benefit, company gross margin was 48.1%4. In fiscal 4Q-2026 (September 2026 quarter), tariff refunds provided an additional favorable impact of approximately 1 percentage point (100bps) to both company gross margin (reporting at 47.9%) and products gross margin (37.2%), and $0.05 to diluted EPS ($2.10)11,12; excluding refunds, company gross margin was approximately 46.9%11.

As of November 3, 2026, Apple has received the vast majority of refunds related to tariffs paid11. Management has committed to reinvesting all recovered tariff refund proceeds into domestic U.S. innovation and advanced manufacturing initiatives7,4. For forward-looking periods, Apple's fiscal 1Q-2027 (December 2026 quarter) outlook anticipates company gross margin between 45% and 46%, with sequential margin movement driven primarily by higher memory component costs and Siri AI ramp expenses rather than trade policy factors11. While Apple maintains standard risk disclosures regarding potential modifications under Section 301 or future trade measures2, historical IEEPA tariff headwinds have ceased, with duties paid substantially recovered through CBP refunds recognized during the second half of fiscal 20262,11.

Data

The chart below illustrates Apple's disclosed gross tariff costs alongside management's initial guidance across the three quarters of discrete cost disclosures.

Disclosed Tariff Figures

Sources

Also, for transparency and clarity, the vast majority of our products, including iPhone, Mac, iPad, Apple Watch, and Vision Pro, are currently not subject to the global reciprocal tariffs that were announced in April, as the Commerce Department has initiated a Section 232 investigation into imports of semiconductors, semiconductor manufacturing equipment, and downstream products that contain semiconductors.

For the June quarter, we incurred approximately $800mn of tariff-related costs. For the September quarter, assuming the current global tariff rates, policies, and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add about $1.1bn to our costs.

These both included a benefit from tariff refunds, which had a favorable impact of approximately 1 percentage point in the September quarter. When you remove the tariff refunds from both the June and September quarter, both company and products gross margin would be down about 1 point sequentially, primarily driven by higher memory costs. As of the September quarter, we have received the vast majority of the refunds related to tariffs paid.