Apple stock tumbled by over 4% after US President Donald Trump launched into yet another Twitter tirade on Friday. Trump’s tweets highlighted the worsening trade relations between the US and China.
This tweet came shortly after China announced a further levy of $75 billion worth of tariffs on US goods. Trump told US firms to “immediately start looking for an alternative to China,” in the context of the ongoing trade war between the two. This is what he had to say:
Trump’s Tweets Tear into China But Leave Apple Ducking for Cover
“Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them.
The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.
I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States.”
Apple isn’t the only US firm to have been impacted by Trump’s tweeting, though. AMD shares dropped by 7.4% while Nvidia took a 5% hit to share value. Apple CEO Tim Cook has been making a concerted effort to reach out to Trump to limit the damage of a worsening trade war situation.
Trump had said that he found Cook’s argument that tariffs would hurt Apple’s competitiveness vis a vis foreign firm Samsung, “compelling.” As of now, though, it’s not clear as to what, if anything, Trump plans to do about this
Apple is heavily invested in China. Foxconn, Apple’s partner in China manufacturers millions of iDevices. Their Shenzhen factory park hosts over 300,000 workers. Foxconn’s access to the low-cost, high-skilled workforce in China has been one of the key driving forces behind Apple’s consistently high margins.
Limited assembly functions have been moved out of China (e.g., iPhone assembly in India). However, there is no real “alternative to China” at present which wouldn’t incur a massive increase to manufacturing costs.
It will be interesting to see how the trade war commences in the months ahead and how companies like Apple will adapt to the changing environment. What’s not so good is the very real possibility of further increases to iPhone prices because of this.