MW Before buying Apple's stock, know that chances of a tariff exemption are slim

By Laila Maidan

In 2018, Washington came to the table willing to bend. This time, policy frictions mean exemptions are less likely.

Investors are worried about Apple Inc. And rightfully so.

The smartphone maker's supply chain is in the spotlight after President Donald Trump's tariff announcements late Wednesday. Its stock $(AAPL)$ has since fallen by more than 14% as of Friday's close.

Top of mind is whether the smartphone maker can score a tariff exemption, since that's what happened during Trump's first administration. But in 2018, companies were given an opportunity to respond with reasons why they believed certain products should be exempt, which meant Washington came to the table willing to bend.

This time, Trump passed tariffs through the International Emergency Economic Powers Act (IEEPA) without a process that allowed companies to request exemptions, according to a note from Morgan Stanley - which added that if Apple were to receive one, it would need to come directly from the president. For that reason, the investment bank pegs the chances of an exemption at only 20%.

Hardware is a big chunk of Apple's business and contributes about 80% of its revenue. A recent set of estimates from J.P. Morgan projected that the company would need to raise prices by 6% globally to absorb the blow of tariffs. But that could drag down demand.

Morgan Stanley estimates the tariffs could cost Apple an additional $33 billion annually and cause a 26% drawdown on its earnings per share, assuming no maneuvers are made to alleviate the impact. However, if the company is able to share costs with its suppliers and/or raise prices, the investment bank believes the negative impact to its forward EPS would be more like 10% to 15%. The analysts gave a share price of $168 as a bear case, though their base case is $252. Apple's stock was trading at $191 on Friday.

But Haran Segram, an adjunct assistant professor at New York University's Stern School of Business who teaches valuations, cautions against trying to value Apple's stock right now - referring to it as an impossible task that's based on rapidly shifting and unpredictable circumstances.

"I won't recommend anybody to sell at this point," Segram said. "And if somebody were to buy something, that is also not recommended, because it could be a falling knife."

-Laila Maidan

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April 04, 2025 17:00 ET (21:00 GMT)

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