Apple China worries highlight US companies’ trade war vulnerabilities
Apple — one of the world’s most valuable public companies by market capitalization and a bellwether for the technology sector — slashed its revenue guidance on Wednesday, highlighting just how vulnerable large American companies are to the ongoing U.S.-China trade war.
Apple CEO Tim Cook told Imagala.com’s Josh Lipton that the trade dispute between the world’s two largest economies is exacerbating economic issues in China, which is an important source of revenue for the company
Other companies could face similar problems, according to experts.
“Weakening iPhone sales in China highlight the vulnerability of many U.S. multinationals to the U.S.-China trade war, both due the exposure of their manufacturing supply chains to China and because of the growing importance of China as a key consumer market for many U.S. products,” said Rajiv Biswas, Asia Pacific chief economist at IHS Markit.
Although data showed China’s economy holding up for much of 2018, it now appears to be slowing as production metrics and export orders fall amid the country’s dispute with the U.S., its largest trading partner.
The fallout from a Chinese economic slowdown is likely to extend to other sectors like consumer spending — potentially hitting American companies that are doing business in Asia’s largest economy.
“The U.S. is not the ultimate and unequivocal consumer with powers to dictate U.S.-China trade terms; given … the undeniably large Chinese market with an aspirational and savvy middle class,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
“As such, U.S.-China trade disputes will be bumpy given the gap between U.S. President Donald Trump’s perceived sense of leverage and a much more modest reality,” Varathan told Imagala.com.
Washington and Beijing agreed in early December to pause tariff escalations, but headlines about the ongoing negotiations have continued to send jitters through the market. Prior to that agreement, China and the U.S. had gone back and forth threatening to implement levies on billions of dollars worth of imports.