The phrase on the back of iPhones—“Designed by Apple in California. Assembled in China”—highlights a key reason for the company’s remarkable success but also shows how exposed it is to the escalating U.S.-China trade fight.

By assembling its phones in China, Apple Inc. tapped into China’s vast workforce and formidable manufacturing capabilities. But it also made Apple’s most-profitable product a Chinese export—one that could be subject to tariffs in the trade dispute.

On top of that, China is by far Apple’s most important market outside the U.S., leaving it exposed if Beijing decides to retaliate by squeezing its sales.

“They should be nervous,” said David Dollar, a China scholar at the Brookings Institution, who was the U.S. Treasury’s top official in Beijing during the Obama administration.

Smartphones weren’t included in the levies on $34 billion of Chinese goods imposed on July 6, nor are they targeted in a second round worth $16 billion that is expected in August. They also haven’t been included in a third round of $200 billion in goods that the Trump administration identified earlier this month.