In a move that has sent ripples through global supply chains, U.S. President Donald Trump has announced a 25% tariff on iPhones manufactured outside t
In a move that has sent ripples through global supply chains, U.S. President Donald Trump has announced a 25% tariff on iPhones manufactured outside the United States, specifically targeting India-made iPhones sold in the U.S. market. This policy, articulated through a post on Truth Social on May 23, 2025, is part of Trump’s broader trade policy aimed at boosting domestic manufacturing. The decision poses a significant challenge to Apple’s ambitious plans to expand production in India under the Make in India initiative, while also raising concerns about supply chain dynamics, consumer prices, and U.S.-India trade relations.
Apple has been steadily diversifying its manufacturing base away from China, where approximately 90% of its iPhones are currently assembled, due to escalating U.S.-China trade tensions and tariffs as high as 125% on Chinese imports. India has emerged as a key alternative, with Foxconn, Tata Electronics, and Pegatron—Apple’s primary contract manufacturers—ramping up production in the country. In the fiscal year ending March 2025, India produced iPhones worth $22 billion, a 60% increase from the previous year, accounting for nearly 20% of Apple’s global output. The company aims to manufacture 25% of its iPhones in India within the next few years, a goal supported by India’s Production Linked Incentive (PLI) scheme, which has disbursed nearly $1 billion to Apple’s partners between 2022 and 2025.
However, Trump’s latest trade policy threatens to disrupt this strategy. In his Truth Social post, he stated, “I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a tariff of at least 25% must be paid by Apple to the U.S.” This follows earlier remarks during a Middle East trip, where Trump expressed frustration with Apple’s CEO, Tim Cook, for expanding production in India instead of focusing on U.S.-based manufacturing. The tariff threat also extends to other smartphone manufacturers like Samsung, signaling a broader push to localize production.
Analysts argue that shifting iPhone production to the U.S. is impractical. Supply chains for smartphones are complex, relying on components from over a dozen countries, with India primarily handling assembly. According to a Global Trade Research Initiative (GTRI) report, assembling an iPhone in India costs about $30 per unit, compared to $390 in the U.S., due to significantly lower labor costs—Indian workers earn roughly $230 per month, while U.S. workers in states like California command around $2,900. Moving production to the U.S. could slash Apple’s profit margins from $450 per iPhone to as low as $60, unless retail prices rise dramatically. Some estimates suggest U.S.-made iPhones could cost consumers up to $3,500, a price point that could dampen demand in Apple’s largest market, where over 60 million iPhones are sold annually.
The 25% tariff on India-made iPhones is seen by experts as a negotiation tactic to pressure India into offering more favorable terms in ongoing U.S.-India trade talks. “Trump’s posturing is less about forcing Apple to move production stateside and more about leveraging the company as a bargaining chip,” said Sanyam Chaurasia, a technology market analyst at Canalys Research. India’s electronics manufacturing ecosystem, which supports not only Apple but also hundreds of component makers, could face setbacks if tariffs create regulatory uncertainty. Jaijit Bhattacharya, president of the Centre for Digital Economy Policy Research, noted that such policies could hinder Apple’s ability to build a resilient supply chain in India, a trusted location it shifted to after U.S. signals to diversify from China.
Despite the tariff threat, India remains a cost-effective manufacturing hub. The GTRI report highlights that even with a 25% tariff, India-made iPhones would still be cheaper than U.S.-produced ones due to labor cost advantages and PLI incentives. Apple has already taken steps to mitigate tariff impacts, reportedly airlifting 600 tons of iPhones—approximately 1.5 million units—from India to the U.S. in early 2025 to build inventory before tariffs took effect. Foxconn’s recent $1.5 billion investment in its Indian operations further underscores Apple’s commitment to India as a manufacturing base.
The tariff policy also complicates India’s broader economic ambitions. The Make in India initiative, championed by Prime Minister Narendra Modi, has positioned India as a rising electronics manufacturing hub, with iPhone exports reaching nearly ₹1 lakh crore between April and January 2025. However, Trump’s trade policy could tilt the playing field toward competitors like Brazil, Saudi Arabia, or the UAE, which face lower U.S. tariffs. Industry bodies like the Indian Cellular and Electronics Association have urged policymakers to address these risks to maintain India’s edge.
For Apple, the 25% tariff presents a dilemma: absorb the cost, raise prices, or negotiate exemptions. Analysts like Ming-Chi Kuo suggest that absorbing the tariff would be more profitable than relocating production to the U.S., though this could still impact earnings by an estimated $900 million per quarter. Meanwhile, consumers may face higher iPhone prices, with UBS estimating a potential increase of $100–$300 per device if tariffs are passed on.
As Trump’s trade policy unfolds, its impact on India-made iPhones will test the resilience of global supply chains and India’s role in them. While Apple is unlikely to abandon its India plans, the tariff threat underscores the fragility of international trade dynamics in an era of protectionism. For now, India remains a critical player in Apple’s strategy, but the path forward will require navigating both economic and political challenges
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