Moreover, even if tariffs take a moderate toll on bottom line, the impact could be offset by another macro event: The dollar's recent rally against the Chinese renminbi.
As many readers are likely aware, Apple disclosed on Friday -- through a letter sent to U.S. Trade Representative Robert Lighthizer -- that some of its goods will be impacted by the Trump Administration's plans (first announced in July) to slap tariffs on an additional $200 billion worth of Chinese imports. The products in question are said to include the Apple Watch, AirPods, the Mac Mini, HomePods, accessories such as the Apple Pencil, chargers and cases. They also cover circuit boards and other components imported by Apple's U.S. manufacturing operations.
Apple's remarks came as President Trump indicated that his administration is thinking about imposing tariffs on yet another $267 billion worth of Chinese imports. It hasn't been learned yet which products would be covered by these latest proposed tariffs, should they be imposed.
As of the time of this article, Apple shares were down 1.2% on Monday to $218.64, ahead of Wednesday's iPhone event. They're still up roughly 29% on the year, however.
It's worth stressing that the Apple products affected by the $200 billion tariff list don't include iPhones and iPads, and only impact Mac sales to the extent that Apple assembles some (though not all) of its Macs in the U.S. Analyst Gene Munster estimates the finished products impacted by the tariffs will account for just 5% of Apple's fiscal 2019 (ends in Sep. 2019) sales.
And as the U.S. and China continue to hold sporadic talks aimed at ending their trade dispute, it's certainly not a given that the tariffs will be in effect long-term. Markets have certainly been acting as if Washington and Beijing's trade salvos are part of a high-stakes game of chicken in which one or both sides will eventually flinch.
Meanwhile, given that the lion's share of Apple's product sales involve goods manufactured in China, the company's bottom line should benefit a little from the dollar's rally against the renminbi. Since mid-April, the dollar has gained about 9% against the renminbi; that should lower Apple's bill (in dollars) for products made in China by contract manufacturers such as Foxconn and Pegatron, as well as for Chinese-made components.
The dollar's gains against the renminbi do also serve to lower the revenue that Apple gets from the sale of its goods and services in China, at least unless the company raises prices. However, with the Greater China region (it covers Mainland China, Hong Kong and Taiwan) accounting for 18% of Apple's revenue as of last quarter, this should be more than offset from the bottom-line benefit it gets from lower manufacturing and component costs.
It's possible that the U.S./China trade war could eventually become a bigger problem for Apple, should the dispute last longer than expected and/or if future tariffs directly hit iPhone imports. However, for now, it's still mostly a sideshow for the company.And that's particularly true when one compares its importance to something like a major product event where three new iPhones, along with new iPad Pros and Apple Watches, are expected to be unveiled.