Why Apple Stock Is Sinking Today

Shares of Apple (NASDAQ: AAPL) are heading lower in Thursday's trading. The tech giant's stock was down 4.2% as of 3:30 p.m. ET. Meanwhile, the S&P 500 and the Nasdaq Composite had fallen 3.6% and 4.4%, respectively.

The stock market skyrocketed yesterday after President Donald Trump announced a 90-day lifting of reciprocal tariffs on all countries except China, but valuations are heading lower today after new information emerged. While Trump announced yesterday that an import tax rate of 125% would be applied to Chinese goods, it turns out the tariff rate is now 145%.

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Apple stock slumps as the U.S.-China trade war heats up

The Trump administration said today that the 125% tariff on China that it cited yesterday actually represented an added import tax on top of an existing 20% tax on products from the country. A tariff of 145% on Chinese goods has now gone into effect, and investors are responding by selling out of Apple and other stocks today.

The iPhone maker relies on factories in China for the manufacturing of some of its key hardware, and it could see immediate effects from the rapidly escalating trade war.

What's next for Apple?

In response to the new tariff environment, some analysts think that Apple could move to rapidly scale up its manufacturing in India, but it still faces significant challenges in light of new import taxes. Morgan Stanley analyst Erik Woodring published a note today saying that Apple could still see an adverse effect between $7 billion and $8 billion on next year's iPhone sales even if the company manages to shift roughly 60% of production to India.

Woodring maintained an overweight rating and a one-year price target of $220 per share on the stock due to expectations that Apple will be able to shift about 50% of the tariff costs to suppliers and lower the effect on its earnings per share. The analyst's price target implies upside of roughly 15% compared to its current valuation.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.