US halving China fentanyl tariff may prompt Apple to rethink India plans

US tariff cut on Chinese goods renders India's higher production costs unsustainable, threatening the recent surge in iPhone exports

The United States’ decision to reduce its punitive fentanyl tariff on all Chinese imports could prompt Apple Inc. to re-examine its strategy of expanding iPhone production in India where it could also relook at the massive capacity it’s undertaking.

 

India doesn’t have any duty on iPhone exports, giving it an advantage over China in supplies to the US. China forked out 20 per cent fentanyl duty, which US president Donald Trump has agreed to halve after a meeting with Chinese president Xi Jinping on the sidelines of the APEC summit in South Korea on Thursday.

 

As India’s production cost to make an iPhone is still estimated to be 12 per cent higher than China’s (even despite New Delhi’s incentives to Apple), the remaining 10 per cent tariff advantage is insufficient. This calculation could prompt Apple to favour China for exports over India once again.

 

 

The US is a $40 billion annual market, which got 80 per cent of its iPhone supplies from China in FY 25. However, as differential tariffs favour New Delhi, Apple has been increasing iPhone exports from India to the US.

 

India exported iPhones worth $900 million in September this year, up more than threefold compared to $258 million the same month the previous year.

 

Exports to the US from India grew threefold from $258 million in 2024 to $900 million last month. The US market accounts for 50 per cent of total iPhone exports by value from India. Between April–September, India’s electronic exports grew by 60 per cent to hit $13.5 billion. Of that amount, 75 per cent was accounted for by iPhone exports.

 

Apple has expanded its assembly capacity in India with its vendors Foxconn and Tatas launching two new factories. It is expected that by the end of FY26 one fourth of the total production value of iPhones will come from India.

 

Sources said the Indian government, in order to continue the momentum in smartphone export, will have to provide incentives to Apple to reduce the cost of production gap. A key requirement will be continuing the production-linked incentive scheme, which ends in FY26 and provides incentives of 4-6 per cent on a phone’s production value. Indian smartphone manufacturers have also demanded that the government review its permanent establishment rules to improve the country’s tax competitiveness against China and Vietnam.