Why Apple's Stock Is Surging Today

Shares of consumer tech giant Apple (NASDAQ: AAPL) traded over 5% higher, as of 11:51 a.m. ET today, after officials from the U.S. and China announced a 90-day pause on extremely high tariffs rates, setting the stage for a broader trade agreement. The Dow Jones Industrial Average (DJINDICES: ^DJI) traded over 860 points higher, while the tech-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) was up about 3.4%.

Apple benefits from de-escalation

Few large tech stocks will benefit more from a de-escalation in trade tensions between the U.S. and China than Apple. Apple makes as much as 90% of its iPhones in China, according to some analysts.

Image source: Getty Images.

And moving its operations out of China would be very costly, considering the company has built significant infrastructure in the country and directly employs 14,000 people in China, not to mention the many others indirectly involved in its supply chain.

Wedbush analyst Dan Ives had previously estimated that it would cost Apple about $30 billion over three years just to move about 10% of its production to the U.S. Now, the Trump administration in April had temporarily exempted consumer electronics like smartphones from the Chinese tariffs.

However, Apple's CEO Tim Cook had estimated the company would take a $900 million hit from tariffs in the current quarter. Furthermore, media outlets had reported that Apple was contemplating increasing the price of its iPhones, although the company wasn't necessarily planning to link the potential increase to tariffs.

Worst of U.S.-China trade tensions likely over

With the worst of U.S.-China trade tensions now hopefully in the past, things look a lot better for Apple. Cook seems to have a running dialogue with Trump, which should help the company avoid any kind of tariffs that are overly punitive, boding well for the stock.

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Bram Berkowitz 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.