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U.S. tariff threat may compound Apple's iPhone woes - BofA

U.S. tariff threat may compound Apple's iPhone woes - BofA
An Apple Store employee takes an iPhone product out of a drawer during the grand opening and media preview of the new Apple Carnegie Library store in Washington, U.S., May 9, 2019. REUTERS/Clodagh Kilcoyne -
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(Reuters) – Apple Inc <AAPL.O> could see a hit to its annual earnings from U.S. President Donald Trump’s newly proposed 10% tariff on Chinese imports from September 1, analysts from Bank of America Merrill Lynch said on Friday.

Shares in the iPhone maker, which reported a surprise improvement in its fortunes in China earlier this week, sank more than 2% in morning trade, adding to similar losses a day earlier after Trump tore up a trade truce with China that had lasted just over a month.

“Our back of the envelope math suggests the impact (of the new tariffs) will be roughly $0.50-$0.75 (annualised per share) hit to earnings with roughly $0.30-$0.50 from iPhones,” the brokerage said.

Trump has used tariffs as a tool as he seeks to negotiate better terms of trade for the United States, saying bad deals cost millions of U.S. jobs.

The BofA note also provided for the possibility that Apple might raise prices of iPhones by around 10%, reducing demand for the phones by 20% or around 10 million units.

(Reporting by Munsif Vengattil in Bengaluru; Editing by Arun Koyyur)

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