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American Consumers Stay Loyal to iPhone Despite Tariff Concerns
Recent data indicates that American consumers continue to display loyalty to the iPhone, even as uncertainties surrounding Apple’s future emerge from potential tariffs imposed by President Donald Trump. A new research note from Morgan Stanley reveals that the findings from their March U.S. iPhone survey, which involved 3,300 participants, were unexpectedly positive despite the ongoing trade tensions between the United States and China.
One of the standout results from the survey was the all-time high rates of iPhone upgrade intentions, coupled with a stronger-than-anticipated acceptance of Apple Intelligence, the company’s generative artificial intelligence system. This is particularly encouraging news, considering that Apple Intelligence did not launch in time for the unveiling of the iPhone 16 in September, instead facing a staggered rollout and some initial setbacks.
Prior to the discussions around tariffs, the conversation was largely centered on the features of the iPhone’s AI capabilities and the implications of their delayed release on the upgrade cycle. “When we take a comprehensive view beyond this tariff uncertainty, we believe that advancements in Apple’s software and hardware could enhance device replacement cycles and open new revenue opportunities from services,” the analysts noted.
As a result, Morgan Stanley has maintained its buy-equivalent rating on Apple’s shares, with a price target set at $220 each, suggesting a potential upside of approximately 14% from the previous close. Following this news, Apple saw a surge in its stock on Tuesday, coinciding with a broader market rebound attributed to optimism regarding a potential easing of U.S.-China relations. Treasury Secretary Scott Bessent indicated in a closed-door investor meeting that he anticipates a “de-escalation” in trade tensions soon, as reported by a source who attended the meeting.
Despite these positive developments, it’s important to note that both Apple and the S&P 500 have faced significant declines year-to-date. Apple has experienced nearly a 20% drop in 2025, while the S&P 500 has fallen by over 9.5% during the same period.
Increased Consumer Interest and Market Dynamics
The Morgan Stanley survey is not the only indication of heightened interest in iPhones. An April 7 report from Bloomberg highlighted increased foot traffic in Apple stores, as consumers rushed to purchase iPhones before any potential price hikes resulting from tariffs. Shortly thereafter, Trump announced exemptions for electronics, including smartphones and laptops, from proposed hefty tariffs, sparing nearly all but 20% of a prospective 145% increase on imports from China.
Nevertheless, White House officials cautioned that these exemptions might be short-lived and were initially designed to provide companies a window to transition production to the United States. Should these tariffs take effect, iPhone prices could escalate to around $3,000 each, adding significant pressure on both Apple and consumers.
Verizon’s CEO, Hans Vestberg, expressed concerns about the impact of rising smartphone prices due to tariffs, emphasizing that the company would not absorb the additional costs. “We will maintain financial discipline with our promotions, but we will not cover substantial tariff hikes on handsets,” he stated during a post-earnings call, foreshadowing potential price impacts on consumers.
Apple’s Response to Tariff Challenges
In light of the looming tariff threats, Apple is taking proactive steps to mitigate the risks. According to Reuters, the tech giant has significantly increased its device production in India, aiming to diversify its supply chain away from China. Additionally, Apple has airlifted 600 tons of iPhones from India to the U.S., signaling a robust effort to minimize dependency on Chinese manufacturing. However, the situation remains precarious; should Trump’s temporary exemption expire, imports from India may be subjected to new tariffs of 26% unless trade negotiations yield favorable outcomes.
Looking Ahead
While the Morgan Stanley survey offers a glimmer of optimism regarding near-term sentiment for Apple’s flagship product, apprehensions surrounding the broader impact of tariffs persist. The company’s ongoing strategy to adapt to trade policy challenges includes diversifying production locations, but doubts remain about whether these measures will fully satisfy the U.S. administration’s demands for domestic manufacturing.
As Jim Cramer remarked, “The company’s initiative to shift some production to India may not align with what the president envisions. There are hardline factions within the government advocating for no exemptions.” The pressure is mounting as the industry watches closely how Apple navigates its quarterly earnings report on May 1, 2025, which could provide critical insights into the company’s reaction to ongoing trade policies and its financial performance during the first quarter of the year.
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