Americans still want iPhones even if Apple is on borrowed time with Trump

Published Tue, Apr 22 20252:40 PM EDT

New data shows that American consumers are prepared to remain loyal to the iPhone even as Apple's future remains uncertain due to President Donald Trump's tariffs. The news In a Tuesday research note, Morgan Stanley said the results of its March U.S. iPhone survey of 3,300 people were "surprisingly positive" despite the escalating trade feud between the United States and China. Among the key takeaways, analysts saw all-time high iPhone upgrade intention rates and stronger-than-expected adoption of Apple Intelligence, the company's generative artificial intelligence system. This is particularly good news because Apple Intelligence was not ready when the iPhone 16 was unveiled back in September. It has since had a staggered rollout and some bumps along the way. Before the tariff chatter, how the iPhone's AI features — and if their slow launch will impact the upgrade cycle — were all anyone ever talked about. "As a result, when we take a step back and think beyond this period of tariff uncertainty, we believe that Apple's software and hardware advances – if properly executed upon – should help to accelerate device replacement cycles and create incremental services revenue opportunities," the analysts said. For that reason, Morgan Stanley reiterated its buy-equivalent rating on shares and its price target of $220 apiece, implying a roughly 14% upside from Monday's close. Apple surged on Tuesday as the broader market rebounded on hopes that U.S.-China relations could soon ease. In a closed-door meeting with investors Tuesday, Treasury Secretary Scott Bessent said he expects a "de-escalation" in the "very near future." That's according to what a person in the room told CNBC. The S & P 500 and Apple put dents in their sharp Monday declines. Still, they were both sharply lower year to date. Apple has lost nearly 20% in 2025 while the S & P 500 has dropped more than 9.5% over the same stretch. AAPL YTD mountain Apple (AAPL) year-to-date performance Big picture The Morgan Stanley survey is not the first time that we're hearing about a recent uptick in iPhone interest. On April 7, Bloomberg reported that Apple stores were being packed with people trying to buy iPhones ahead of any potential price increases due to tariffs. Less than a week later, Trump exempted electronics such as smartphones and laptops from his "reciprocal" tariffs, including all but 20% of the president's proposed 145% levies on imports from China. White House officials warned that the exemptions could change soon since they were made to give companies more time to move production to the U.S. If these steep levies were to go into effect, iPhone prices could spike to $3,000 each. Estimates on what it would cost to make iPhones in the U.S. were similarly bleak. That dynamic would be tough for both Apple and potential iPhone buyers. Verizon CEO Hans Vestberg said Tuesday that if smartphone prices surge due to tariffs, the company won't be eating the additional costs. "We will continue to be financially disciplined in whatever promotions we have, but we will not cover any enormous increase on tariffs on handset," the CEO said during Verizon's post-earnings call. "That's ultimately going to hit the consumer in the market. But again, it's too early to say," he added. Still, Apple is trying to do everything it can to beat these tariffs. According to Reuters, the tech behemoth has stepped up device production in India to further diversify its supply chain away from China, and it even went so far as to airlift 600 tons of iPhones from India to the U.S. To be sure, when Trump's temporary pause of "reciprocal" tariffs to 10% lifts, Indian imports will be subject to 26% levies unless a trade deal is reached. On April 9 , he said after 90 days, the higher country-specific levies would kick in as outlined a week earlier — again, barring any trade deals. Bottom line We're glad to hear that the Morgan Stanley survey indicates more positive near-term sentiment on Apple's biggest money maker. But that doesn't change our caution on the tech stock amid Trump's trade war with China. That's the reason we trimmed our long-held Apple position Monday. While Apple does benefit from the president's tariff exemption on electronics, we assume the reprieve will be short-lived. Apple's efforts to diversify its supply chain away from China may not be enough to offset tariff risk. It definitely won't be enough to satisfy the Trump administration's call to move manufacturing domestically. "The company's shifting of some production to India, the default destination for the iPhone, may not be what the president wants. There are hardliners within the government who want no exemptions," Jim Cramer wrote in his April 13 column when he first suggested investors sell some Apple shares. "Apple must break ground in the United States to make its products." We had been restricted from executing the trade for the Club until Monday. Jim also commented on those Tuesday conference call comments from Vestberg. "Verizon is in a very tough spot. They have to provide a phone," Jim said during Tuesday's Morning Meeting. "If Apple's phone goes to $3,000, they [Verizon] will push Samsung [instead], I believe." We'll be closely watching Apple's quarterly earnings report on May 1 for indications on how the company plans to respond to trade policy and how its business went in the first three months of 2025. (Jim Cramer's Charitable Trust is long AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Apple's Series 16 iPhones are seen on display at the Apple Store on Regent Street in London, England, on Sept. 20, 2024.

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New data shows that American consumers are prepared to remain loyal to the iPhone even as Apple's future remains uncertain due to President Donald Trump's tariffs.