• Apple has a loyal customer base, strong gross margins - and a history of getting tariff exemptions

President Donald Trump sent ripples across the technology sector on Wednesday, with a tariff announcement that one analyst called "worse than the worst-case" scenario.

That was Wedbush's Daniel Ives, who wrote that Trump's intent to put a tariff of 34% on goods from China was "the jaw dropper" in Wednesday's speech. The forthcoming tariff is said to be on top of the 20% tariff previously announced.

Apple Inc.'s stock $(AAPL)$ was among the hardest hit in the tech sector during Wednesday's extended session, reflecting fears about the company's supply chain. Shares fell 7.1% in Wednesday's after-hours action. Were that action to carry through to the regular session Thursday, it would mean the worst single-day drop for Apple shares since they lost 8.0% on Sept. 3, 2020.

The stock market is jittery and has a tendency to sell now and figure things out later. But Apple was exempted from big tariffs in Trump's first administration, and the question now is whether the company can secure similar exceptions this time around.

Ives thinks the tech giant is bound to get a similar pass. "It's a very nervous announcement for Apple given its China exposure," Ives told MarketWatch. But he thinks iPhones and other Apple products ultimately will win exemptions.

"Investors will sell the stock and ask questions later, but we saw it play out in Trump 1.0," Ives said.

The magnitude of Apple's after-hours stock drop seems to highlight two inconvenient issues for the company if the tariffs do go into effect. One is that while Apple has made efforts to diversify its supply chain over the years, that's less helpful in an environment where Trump plans to impose broad tariffs. For instance, Apple has expanded production to Vietnam, but Trump announced a 46% tariff affecting goods made there. The other issue is that in this economic environment, it might be more difficult for Apple to hike the prices charged to consumers without hurting its profitability.

On the flip side of that argument, the pounding on the stock may be extreme.

"Even without an exemption, things may not be as bad," said Angelo Zino, a technology analyst at CFRA who has a buy rating on Apple's stock. "Over the last six years, Apple has expanded its gross margins from about 38% to 47%, which gives them a bit of leeway if they have to take a hit on tariffs."

Alternatively, Apple may spread out the costs across its supply chain. But if customers feel the costs, Apple will count on strong retention rates because of its brand and a rich ecosystem, thanks to the suite of services it provides. Those make up about 21% of its total net sales.

"For now, the White House will say they are not looking for deals... but we continue to believe there are offramps and major negotiations that will happen over the coming months with various countries and companies to navigate this new world of tariffs," Ives wrote.

Apple didn't immediately respond to MarketWatch's request for comment following Trump's announcement. When asked about tariff impacts on Apple's last earnings call in January, Chief Executive Tim Cook said he and his team were "monitoring the situation and don't have anything more to add than that."

Zino has faith that Apple's leadership team will navigate the situation effectively. "We trust the management execution at Apple better than we do others across the tech ecosystem."