Stocks Are Still Vulnerable to a Tariff Shock. What Apple and Amazon Earnings Reveal.

(Justin Sullivan/Getty Images)

Toblerone, upscale watches and cuckoo clocks are about to get pricey—President Donald Trump’s tariffs are finally arriving and Swiss goods are among the hardest hit. It’s an example of the uneven impact of import taxes that is making earnings reports opaque.

Apple and Amazon are a case in point. The iPhone maker’s sales far surpassed expectations for the June quarter, but that was partly due to a rush to buy devices before tariffs kicked in. With a 25% tariff being imposed on India—where the company now produces its smartphones for the U.S. market—next quarter’s sales might not look so rosy.

Meanwhile, Amazon says it hasn’t felt any effect from tariffs so far. But CEO Andy Jassy admitted it was “impossible to know” what will happen when the company and third-party sellers run through their built-up inventories. With many products on Amazon’s platform sourced from China, the lack of visibility is set to continue while negotiations rumble on between Washington and Beijing.

The one certainty is that costs for companies and consumers are set to creep up. The average U.S. tariff rate in the first quarter was 2.4%, but 10% in June. The latest levy announcements are set to bring that to more than 18%, according to analysts at Gavekal Research. Even allowing for future deals, the baseline level appears to be around 15%.

The consequence will likely be a market focus on the artificial-intelligence trade, which appears tariff-proof —unless Trump announces levies on chips. Then it might be more than just fans of trianglular-shaped chocolate who receive a nasty shock.

— Adam Clark

***

Trump Sets a 10% Baseline Tariff, With Exceptions

President Donald Trump’s trade deal deadline is here, and hours before it was set to kick in, he announced 10% baseline tariffs on imports from around the world except for about 70 countries that face mostly higher levies on their products because they hadn’t reached a deal.

• The new baseline takes effect on Aug. 7, with exceptions. For example, tariffs on goods imported from Canada will be 35%, starting today. The administration cited the flow of the deadly drug fentanyl across the border. It’s one of the highest rates for a close trading partner.
• Countries seem to be sorted into three groups: those that have secured deals, those that are still working on it, and those that haven’t engaged. Products from many countries in the exception group face 15% tariffs, but some countries like Laos and Myanmar face higher 40% tariffs.
• The additional rate for transshipping, which is when countries send goods through other countries whose goods face lower tariffs, is set at 40%. Earlier in the day, Trump said he’d be sending letters around to countries telling them about his new tariffs.
• Earlier Thursday Treasury Secretary Scott Bessent said the U.S. was drawing closer to a deal with China after a third round of talks this week in Stockholm. He told CNBC there are a few technical details to be worked out on the Chinese side, and that it isn’t 100% done.

What’s Next: Unlike Canada, Mexico got a 90-day extension to negotiate a deal that will keep tariffs on its products at 25% rather than the 30% threatened. Mexico’s President Claudia Sheinbaum said on social media she had a very good call with Trump.

— Liz Moyer and Anita Hamilton

***

Trump Talks Tough on Drug Prices but Softens Demands

President Trump posted letters to his Truth Social platform Thursday that the White House had sent to 17 large pharmaceutical and biotech companies. They threatened to cut certain U.S. prices late September, or else the administration will “deploy every tool in our arsenal to protect American families.”

• The new demands appear to require less from the companies than had been implied by an executive order on drug pricing the president signed two months ago.
• The executive order from May told federal agencies to determine most-favored-nation prices for drugs and laid out penalties if the companies didn’t make “significant progress” toward lowering U.S. pricing to those levels.
• The new letters posted Thursday make narrower demands. Trump told companies they must lower the prices of drugs already on the market to most-favored-nation rates only for Medicaid, the health insurance program for low-income Americans paid for jointly by state governments and the federal government.
• Details about the plan remain scarce. The drug industry lobby group PhRMA criticized the measures in a statement.

What’s Next: Raymond James analyst Chris Meekins told Barron’s the new approach is potentially more realistic than the May order. “Attempting to try to make sure the U.S. gets better prices on future products is something companies can work with the administration to try to do going forward,” he said.

— Josh Nathan-Kazis and Elsa Ohlen

***

Apple’s Quarter Boosted by iPhone Sales Ahead of Tariffs

Apple reported a bigger than expected bump in iPhone sales as consumers rushed to beat the implementation of the Trump administration’s tariffs. But CEO Tim Cook said that the vast majority of the gadget maker’s products are safe from the steepest tariffs, for now.

• Third-quarter iPhone sales of $44.58 billion surpassed estimates for $40.09 billion, and iPad and Mac sales also beat expectations. CFO Kevan Parekh said the total devices in active use reached a record high across all product categories and geographic segments.
• Apple’s third-quarter adjusted earnings of $1.57 a share and revenue of $94 billion surpassed estimates. Apple services revenue, including Apple Music, Apple’s App Store, and other digital offerings, climbed 13% to $27.42 billion, beating expectations of $26.82 billion and marking a record high.
• Greater China segment revenue rose 5% to $15.4 billion from the prior year, also beating expectations. While Apple has relied on China to make its iPhones, that has shifted. Electronics are temporarily exempted from the Trump administration’s tariffs, and iPhone production has shifted to India.
• Cook said Apple incurred about $800 million of tariff-related costs in the June quarter, below the $900 million expected. Assuming that current global tariff rates policies don’t change and new tariffs aren’t added, Apple estimates the September-quarter impact to be $1.1 billion in costs.

What’s Next: Parekh said Apple expects September-quarter revenue to grow by “mid to high single digits” rate from a year ago, assuming no change in tariff rates. At the midpoint, that would be above Wall Street’s forecast for $97.6 billion, which implies annual growth of 2.8%.

—Angela Palumbo, Tae Kim, and Janet H. Cho

***

Amazon Beats Expectations But Its Outlook Spooked Investors

Amazon beat expectations for earnings but there was something in its outlook that spooked investors. Third-quarter guidance for operating income wasn’t as strong as people expected, making it appear as though something is weighing on third-quarter profitability. The culprit could be tariffs.

• Earnings rose to $1.68 a share and revenue for the quarter rose 13%, to $162 billion compared with a year ago. Amazon Web Services, the cloud business, saw a 17% jump in revenue and brought in 53% of the quarter’s operating profit.
• And then there are the four-fifths of Amazon’s revenue that aren’t AWS, most of it from retail. Amazon’s retail segments had a banner quarter, with $107 billion in sales. Revenue was up by 11% from 2024, well ahead of the Wall Street consensus.
• The full effects of tariffs haven’t been felt yet. The average U.S. tariff rate rose through the second quarter and will likely keep rising with new tariffs. Third quarter operating income was projected in a range of $15.5 billion to $20.5 billion, below consensus at the midpoint.
• Amazon CEO Andy Jassy highlighted all the uncertainties around how the tariff issue will play out in the rest of 2025. He said through the first half of the year they hadn’t seen diminishing demand or a meaningful appreciation in prices.

What’s Next: Amazon has the highest capital expenditures in Big Tech, and not just because of artificial intelligence. In the first half of the year, Amazon spent $56 billion, and projected it would spend about another $60 billion in the remainder—well ahead of analysts’ expectations.

— Adam Levine

***

Figma Stock More Than Triples After IPO Raises $1.2 Billion

Figma’s stock more than tripled when the design software maker made its trading debut on Thursday. The company’s initial public offering raised more than $1.2 billion. It’s the latest sign that the IPO market remains red hot, after CoreWeave and Circle Internet Group went public earlier this year.

• Figma, forced by regulatory concerns to scuttle plans to sell itself to Adobe for $20 billion in late 2023, sold 36.9 million shares at $33 a share, above the expected range of $30 to $32 a share. Shares opened at $85 and quickly moved higher.
• Figma debuted on the New York Stock Exchange under the ticker symbol “FIG.” Based on its closing price, Figma’s valuation is $67.6 billion. “Figma’s IPO is a bellwether event for the tech sector,” Derek Hernandez, senior analyst of emerging technology at PitchBook, told Barron’s.
• Figma’s sales surged 48% to $749 million in 2024. But Figma has alternated between profitability and red ink, posting net income of $737.8 million in 2023 (including a $1 billion merger-termination fee from Adobe), and a net loss of $732.1 million last year.
• Figma has a stake in the Bitwise Bitcoin exchange-traded fund that was valued at $69.5 million as of March 31. Figma disclosed in filings that it bought $30 million worth of USD Coin, the stablecoin backed by Circle, in May. It will use that to reinvest in Bitcoin later.

What’s Next: Despite the splashy debut, there are challenges ahead for Figma. One analyst noted that the increased use of generative artificial intelligence technology threatens to disrupt the business model for Figma. Worries about AI are one reason Adobe’s stock has struggled lately, too.

— Paul R. La Monica and Janet H. Cho

***

Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Artificial intelligence spending featured prominently in this week’s earnings reports from big technology companies. Together, Microsoft, Meta, Amazon, and Alphabet are poised to spend more than how much on the technology this year?

a. $300 billion
b. $200 billion
c. $100 billion
d. None of the above

2. Tesla CEO Elon Musk has big aspirations for his humanoid robot business, which is just getting off the ground. He gave an eye-popping estimate for the eventual revenue opportunity. How much did he say it could be?

a. $300 billion
b. $3 trillion
c. $30 trillion
d. None of the above

3. Walt Disney’s Fantastic Four: First Steps surpassed box office expectations and is part of a string of blockbusters this summer that sets Hollywood up to cross $4 billion in ticket sales for the season, according to Comscore. When was the last time Hollywood crossed that threshold?

a. 2024
b. 2023
c. 2022
d. 2021

4. Hopes are high for a spate of initial public offerings after Figma’s stock nearly tripled from its IPO price in its first day of trading. Analysts at D.A. Davidson see other tech companies waiting their chance at the IPO calendar, including which of the following?

a. Genesys Cloud Services
b. Canva
c. Databricks
d. All of the above

5. Higher menu prices have weighed on Shake Shack’s store traffic but the burger chain has a plan to revive it with which of the following?

a. Fried pickles
b. Chocolate pistachio shakes
c. Loyalty programs
d. All of the above

Answers: 1(a); 2(c); 3(b); 4(d); 5(d)

— Barron’s staff

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner