Apple Stock Faces Challenges Amid Trade Tensions and Uncertainty
Apple (NASDAQ:AAPL) Stock has demonstrated robust growth, driven by strong demand for its iDevices, increased margins, and share buybacks. However, recent developments in trade policy could create uncertainty for the company. President Donald Trump has intensified his protectionist measures by imposing tariffs on significant trading partners like China, Mexico, and Canada, posing a considerable risk to Apple’s operations, as it produces most of its products—such as Macs, iPads, and iPhones—overseas.
Image by Kiều Trường from Pixabay
In a downturn, Apple Stock could see significant losses. Evidence from 2022 shows that the stock lost over 30% of its value in just a few quarters. If this trend were to recur, could Apple’s $235 Stock drop to about $160? Individual stocks tend to be more volatile than diversified portfolios; thus, if you want potential upside with lower volatility, consider the High-Quality portfolio, which has outperformed the S&P 500 with returns exceeding 91% since its inception.
Apple’s Growing Business Faces Increased Risks
Why is that relevant now? Apple has consistently expanded through innovative products and a thriving services division. However, the ongoing trade war highlights a new risk factor. President Trump has raised tariffs on goods from China from 10% to 20%, exacerbating the situation, as China accounts for an estimated 90% of Apple’s iPhone production, according to S&P Global. This increase could adversely affect sales among U.S. consumers.
During Trump’s initial term, Apple sidestepped the 10% tariffs, but future outcomes remain uncertain. Although Apple has announced a $500 billion investment in the U.S. and plans to hire 20,000 workers, tangible results from these commitments could take several years to be realized. If tariffs affect Apple’s products, the resultant costs may be absorbed by Apple (through lower margins), consumers (paying higher prices for their devices), or wireless carriers (increased subsidies to reduce the financial burden on customers). Any of these scenarios could negatively impact Apple’s sales volumes and overall profitability.
Trump’s aggressive tariff stances have also sparked fears of returning inflation. This scenario could push the U.S. economy into a downturn or even a recession, as discussed in our analysis on the macro picture. The combination of rising geopolitical uncertainties, such as the ongoing Russia-Ukraine conflict, makes this a concerning time. Tariffs typically elevate import costs, leading to price increases, decreased disposable income, and reduced consumer spending—all detrimental to Apple, a company reliant on discretionary spending. Additionally, as smartphone feature enhancements become incremental, consumers might delay device upgrades in a fluctuating economy, further affecting Apple’s sales.
Assessing AAPL Stock Resilience During Economic Downturns
AAPL Stock is generally perceived as a safe haven and has shown resilience compared to the benchmark S&P 500 index amid recent downturns. Concerns about how a market crash could impact AAPL Stock can be explored in our dashboard How Low Can Apple Stock Go In A Market Crash?, which provides a detailed analysis of the stock’s performance during previous crises.
Inflation Shock (2022)
- AAPL Stock fell 30.8% from a high of $182.01 on January 3, 2022, to $126.04 on December 28, 2022, compared to a peak-to-trough decline of 25.4% for the S&P 500.
- The Stock fully recovered to its pre-Crisis peak by June 12, 2023.
- Since then, the Stock has reached a high of $259.02 on December 26, 2024, and currently trades around $235.
Covid Pandemic (2020)
- AAPL Stock fell 30.7% from a high of $80.91 on February 19, 2020, to $56.09 on March 23, 2020, while the S&P 500 saw a peak-to-trough decline of 33.9%.
- The Stock fully recovered to its pre-Crisis peak by June 3, 2020.
Global Financial Crisis (2008)
- AAPL Stock fell 60.9% from a high of $7.14 on December 30, 2007, to $2.79 on January 20, 2009, versus a peak-to-trough decline of 56.8% for the S&P 500.
- The Stock fully recovered to its pre-crisis peak by October 21, 2009.
High Valuation Amid Slowing Growth
In summary, Apple’s Stock remains costly; it trades at nearly 34 times the consensus FY’25 earnings. Furthermore, its revenues have barely grown in recent years. The company experienced an average annual revenue growth rate of 2.3% over the last three years, compared to 9.8% for the S&P 500.
Given this deceleration in growth and broader economic uncertainties, consider this question: Are you willing to hold onto your Apple Stock as it potentially drops to $200, $160, or even lower? Maintaining a position in a declining Stock is a challenge. Trefis has partnered with Empirical Asset Management— a Boston-based wealth management firm—whose asset allocation strategies managed to generate positive returns during the 2008-09 financial crisis when the S&P lost over 40%. Empirical has integrated the Trefis HQ Portfolio within their asset allocation framework to help clients achieve superior returns with reduced risk compared to benchmark indices, ensuring a smoother investment experience as reflected in HQ Portfolio performance metrics.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Total [2] |
| AAPL Return | -3% | -6% | 780% |
| S&P 500 Return | -2% | -1% | 161% |
| Trefis Reinforced Value Portfolio | -3% | -5% | 651% |
[1] Returns as of 3/6/2025
[2] Cumulative total returns since the end of 2016
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
