After President Donald Trump alluded to the potential for tariffs being placed on Apple iPhones and laptops imported from China in a recent interview with the Wall Street Journal, Morgan Stanley analyst Katy Huberty said that Apple relocating its final assembly base out of China, and even Asia more broadly, is “largely inconceivable” given that China is one of the only countries that can provide such a large and low-cost labor force with the expertise in manufacturing and tooling that is required to assemble over 300M devices annually. She believes the most realistic scenario is to keep the supply chain largely intact in the near-term and either pass the tariff cost to the consumer or absorb the cost of the tariff internally. If Apple were to pass the cost off to consumers, Huberty believes it could face significant demand and unit headwinds. However, if Apple were to fully absorb the full 10-25% tariff, the cost of the tariffs could ultimately impact FY19 EPS by $1 in the case of a 10% tariff and about $2.50 in the case of a 25% tariff, Huberty tells investors. Consensus for Apple’s FY19 EPS is currently $13.45. Huberty has an Overweight rating and $253 price target on Apple shares.