Why Apple Stock Surged Today

Positive tariff news sent shares of the iPhone maker higher.

Timothy Green
Timothy Green
Aug 13, 2019 at 12:59PM
Technology and Telecom

What happened

Shares of Apple (NASDAQ:AAPL) jumped on Tuesday after the Trump administration opted to delay the implementation of tariffs on certain Chinese goods. With cellphones and other electronics now free from the planned 10% tariff until mid-December, Apple's upcoming iPhone launch and holiday season sales shouldn't be affected. Apple stock was up 4.1% at 12:15 p.m. EST; it had been up as much as 5.8% earlier in the day.

So what

A 10% tariff on certain Chinese goods not already affected by 25% tariffs, including various electronics, was set to go into effect on Sept. 1. Apple typically launches new iPhones in September, so the tariff would have been in effect for the launch as well as Apple's holiday sales season.

The iPhone XS.

Image source: Apple.

That 10% tariff is now being delayed until Dec. 15 on some items, including cellphones, laptops, and game consoles. Apple has been diversifying into services, but hardware sales, and especially iPhone sales, remain the company's core business.

This tariff delay will prevent Apple from needing to either eat the cost of the tariffs or raise prices on its hardware. After a weak iPhone launch in 2018, partly due to high prices, Apple may not be able to pass higher costs on to its customers without suffering a big drop in unit sales.

Now what

While Apple stock is surging on this tariff delay, the 10% tariff will go into effect later this year if the U.S. and China don't reach a trade deal by the new deadline, and if the tariffs don't get delayed further. Apple's iPhone sales are already slumping; even higher prices will only make that trend worse.

Apple's holiday season may have been saved by this delay, but the company's heavy dependence on the iPhone remains a problem.