Apple’s India Strategy Faces New Hurdles Amid Trump’s 25% iPhone Tariff Threat

Apple’s ambitious shift of iPhone manufacturing to India is encountering fresh challenges as former President Donald Trump threatens a 25% tariff on all foreign-made smartphones, including iPhones assembled in India. Despite this, a recent report by the Global Trade Research Initiative (GTRI) suggests that producing iPhones in India remains more cost-effective than relocating production to the U.S

Apple’s Manufacturing Pivot to India

In response to escalating U.S.-China trade tensions, Apple has been diversifying its supply chain by increasing iPhone production in India. Foxconn, Apple’s primary assembly partner, has invested $1.5 billion to expand its manufacturing infrastructure in southern India. This move is part of Apple’s broader strategy to reduce reliance on Chinese manufacturingAccording to a GTRI report, assembling an iPhone in India costs approximately $30 per unit, significantly lower than the estimated $390 per unit if produced in the U.S. Even with a 25% tariff, the cost would rise to only $37.50, still far below U.S. production costs. This cost advantage is attributed to lower labor expenses and government incentives under India’s Production-Linked Incentive (PLI) scheme.

Trump’s Tariff Threat and Its Implications

On May 23, 2025, Trump announced plans to impose a 25% tariff on all smartphones not manufactured in the U.S., explicitly targeting Apple and Samsung. He emphasized that iPhones sold in the U.S. should be produced domestically, or else face the tariff. This announcement led to a significant drop in Apple’s stock value, wiping out approximately $70 billion.

Analysts warn that such tariffs could lead to higher consumer prices, supply chain disruptions, and potential inflation. The GTRI report indicates that the value of a $1,000 iPhone is distributed across various countries, with Apple retaining the largest share of $450 for brand, design, and software. The assembly process, primarily conducted in India and China, accounts for only about $30 per device.

Long-Term Outlook

Despite the tariff threats, Apple’s commitment to Indian manufacturing appears steadfast. The company plans to source more than 60 million iPhones annually from Indian factories by 2026. This strategy not only mitigates geopolitical risks but also leverages India’s cost advantages and growing skilled labor force.

However, the imposition of tariffs could strain U.S.-India trade relations and impact global supply chains. While Trump’s policies aim to bolster domestic manufacturing, the feasibility of shifting complex production processes to the U.S. remains questionable due to higher costs and infrastructure challenges.