You might think with the markets up strongly since April's "Liberation Day" fiasco that the threat of tariffs is behind us. But that's a mistake. Many "trade deals" that were consummated over the summer just implemented their final rates, whereas last week we saw an escalation of the tariff war with China -- one of the largest U.S. trading partners besides Canada and Mexico.
So, the tariff issue is ongoing, with reciprocal and "emergency" tariff rates enacted in the second quarter. Those added costs might not flow through to the end consumer until the current fourth quarter or maybe even next year.
That means investors can expect further impacts on these high-end consumer favorites in the fourth quarter. Here's what two highly popular consumer goods leaders are saying about tariff impacts to their businesses, and how it may affect their stocks.
NASDAQ: AAPL
Key Data Points
Apple
Perhaps no other company is a bigger poster child for tariff impacts, and potential offsets, than iPhone giant Apple (AAPL 0.95%). Apple's products are largely assembled overseas, especially China, Vietnam and India, while its in-house designed semiconductors are largely manufactured in Taiwan.
Yet at the same time, Apple has enormous financial resources, and has used that clout to try and earn exemptions. Earlier this year, CEO Tim Cook presented President Trump with a gold-plated iPhone, and pledged to spend a whopping $600 billion in the U.S. over the next five years. That gesture appeared to exempt Apple from the worst of the proposed tariffs.
But it's unclear what Cook meant by that $600 billion figure. Apple spent about $31.4 billion in research and development last year, along with just $9.4 billion in capital expenditures. So that $40 billion is well short of the $120 billion per year outlined by Cook. It's still unclear what Cook meant by that $600 billion figure and how Apple will pay for it.
Yet despite the recent "exemptions," some tariff costs remain. Apple noted on its July earnings call it had paid $800 million in tariffs during the June quarter, and expected $1.1 billion in tariff costs in the September quarter. That's a relatively small proportion of Apple's total profit, but it's also not nothing. Additionally, some believe Apple will turn to raising prices modestly on mid-range iPhones to offset these tariff costs, among other component price increases. However, that remains to be seen. CEO Tim Cook noted predicting the tariff impact beyond the September quarter is difficult.
That's because some trade negotiations and sector-specific tariff policies are still in flux. Last week, trade negotiations with China appeared to go south, with the potential to spill over to affect Apple's operations there. Moreover, the Trump Administration is reportedly considering a 100% tariff on foreign-made semiconductors. That may get dicey if Apple isn't exempt, given that the chips for the latest iPhones and Macs are generally produced on the latest node produced by Taiwan Semiconductor Manufacturing, which still has its most bleeding-edge production in Taiwan.
As of now, it appears Apple can mitigate the worst effects of tariffs with its U.S. investment pledges and near-$100 billion in annual profits. But those U.S. investments will also cost money that could otherwise go to shareholders.
Apple's stock has recently rallied on hopes for a recovery in iPhone sales as we lap four years since the end of the pandemic, when many people bought new phones, and the promise of consumer AI. Still, there remains high uncertainty as to what extra tariffs Apple will have to pay, or what investments the company may be forced to make to avoid them.
Image source: Getty Images.
RH
While the market has largely ripped higher on the back of technology stocks and gold stocks, several consumer discretionary names have actually had pretty bad years. Count luxury furniture brand RH (RH 3.41%) as one of them, as the stock is down over 50% for 2025.
Despite its reported financials rising off last year's revenue and earnings trough, RH investors were perhaps hoping for a more robust recovery from the post-pandemic housing downturn. Adding insult to injury, the stock was hit yet again after President Trump announced new furniture-specific tariffs on September 26, to take effect October 1.
The new tariffs apply a 30% duty on upholstered furniture, with a 50% tariff on kitchen cabinets, bathroom vanities, and other similar products, for countries that don't reach a trade deal with the U.S. But even for those countries that do reach a deal, the tariff on these products should remain at 25%.
It's no surprise RH stock turned down again after the announcement. But it's also possible the effect on RH may not be as dire as feared. On its September earnings call, RH CEO Gary Friedman noted that it would be nearly impossible to begin producing metal and wood furniture in the U.S. anytime soon. However, it should be noted the new tariffs apply to upholstered furniture, not wood and metal. On upholstered furniture, Friedman said workarounds were more possible:
Upholstered furniture, we can make in America. We can do that. We can be competitive because you've got advantages, it's special orders and feed the market and so on and so forth. But there's just not the workforce to make the other stuff. And there's not people there. The next generation doesn't want the jobs.
Friedman elaborated that due to its proactive reshoring efforts, RH will produce 52% of its upholstered furniture in the U.S. by the end of the fiscal year, with 21% in Italy, 12% in Mexico, and the rest in other countries, likely in East Asia.
So, it seems that RH will be able to mitigate some of the impact, although it will also have to pay some tariffs on wood and metal furniture it produces overseas. The sourcing countries for those products have negotiated tariffs already, or are in the process of determining their country-specific tariffs. Overall, in fiscal 2024, RH only sourced 10% of its products from North America. Its largest sourcing country was Vietnam, at 35%, with China second at 23%. The current tariff rate on Vietnam imports is still 20%, following this past summer's deal framework.
Thus, much uncertainty remains around the total tariff impact on RH today. It's good that RH is a luxury brand with a certain degree of pricing power, but it's hard to take that much price in a slow housing market.
However, if the housing market recovers from the downturn and RH can mitigate these tariff rates as they're finalized, the stock could be a turnaround candidate, given how far it's fallen.
Still, as of now, the stock seems appropriate for investors' watchlists, not in portfolios, as the tariff uncertainty and RH's not-insignificant debt load remain big question marks.
