President-elect Donald Trump’s proposed tariff strategy could spell bad news for the tech hardware market, but Tim Cook’s Apple might not feel as much of the pain. On the campaign trail, the former president vowed to impose a universal tariff of between 10% and 20% on all imported goods and at least a 60% tariff on goods from China. Yet, some analysts say that Apple’s high gross profit margins may provide a buffer, unlike other companies with smaller margins that also have extreme exposure to Chinese manufacturing. “While AAPL is thought of as the ‘poster-child’ for leveraging Chinese manufacturing, and thus most at risk if tariffs were to be instituted, they don’t face the most significant [earnings per share] headwind in our coverage given they have a higher gross margin than peers, which limits the incremental tariff impact,” Morgan Stanley analyst Erik Woodring told clients in a note this month. AAPL YTD mountain AAPL, year-to-date That reassurance comes as Apple has been underperforming the stock market’s ‘Trump plays’. For instance, Tesla – which soared nearly 15% the day after the election – has jumped almost 28% in the eight trading days since the vote. Apple over the same span has barely budged. The iconic iPhone and iMac maker has also underperformed the rest of the market for the entire year thus far. While Apple has gained almost 17% this year, the S & P 500 has advanced about 23%, excluding reinvested dividends. Bite out of earnings During Trump’s first term in office, Apple dodged tariffs on its core products when the U.S. reached a trade agreement with China that exempted some consumer goods made in that country – such as phones and computers – from the charges. But assuming there are no exemptions for Apple this time around, Morgan Stanley foresees an EPS loss for the company of 5.5% under a 15% tariff on U.S.-bound imports from China. Under a 25% tariff on goods from China, the Wall Street investment bank sees an EPS loss for Apple of 9.2%. Those estimates make Apple the fifth most vulnerable tech company to potential tariffs on goods from China in Morgan Stanley’s research coverage. “Ultimately, it’s a negative,” CFRA Research analyst Angelo Zino told CNBC. “It’s going to somehow eat into Apple’s earnings, whether it be through potentially lower volume if they push through it or via just lower margins if they were to absorb some of the cost.” Still, Zino believes any impact could be relatively muted – and potentially offset…
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