Top Apple analyst Kuo says iPhone prices won't go higher amid the trade war with China

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The Apple logo is seen on the window at an Apple Store on January 7, 2019 in Beijing, China.

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One of the world’s top Apple analysts is telling clients that the intensifying trade war between the U.S. and China won’t impact the price nor the shipment forecasts for the company’s products in the U.S. market.

Ming-Chi Kuo of TF International Securities said in a note that Apple has planned ahead for the protracted trade war and should be able to offset the costs even with higher import costs.

“The market is worrying that prices of Apple’s major hardware products for the U.S. market (including iPhone, iPad, MacBook, Apple Watch and AirPods) will rise and there will be negative impacts on shipment forecasts,” Kuo wrote on Sunday. “However, we believe that Apple had made proper preparations for it.”

“If the U.S. government starts to hit $300 billion worth of Chinese goods with a 10% tariff, we forecast that, in the mid-short term, Apple will absorb most of the additional costs due to tariffs, and the prices of hardware products and shipment forecasts for the U.S. market will remain unchanged,” Kuo added.

Still, the analyst added that there could be consequences for Apple’s bottom line if it chooses to bear the higher costs. While the company may garner better brand image and relationships over the long run by absorbing the tariff costs, Apple’s profits would likely see a brief slowdown in the near term.

Over the long term, Kuo said Apple will increase its production outside of China “to avoid the cost increase of products sold in the U.S. market.”

“The negative impact on Apple are limited and temporary because the profit from service business is growing, and non-Chinese production locations will gradually increase,” the analyst wrote. “We believe that Apple’s non-Chinese production locations could meet most of the demand from the U.S. market after two years.”

Apple shares fell more than 2% in premarket trading Monday, continuing their decline from last week after Trump added tariffs of 10% on $300 billion more in goods made in China.

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