Apple in Trump's Trade Crosshairs as China and US Agree to More Talks

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Stocks staged an afternoon rally reversing early losses after China and Trump agreed to more talks.

Stocks reversed course on Friday but are down for the week following a series of absurd Tweets by president Trump on trade policy.

The Wall Street Journal reports Stocks Bounce Back, Close Higher as Investors Weigh New Tariffs.

Stocks slid to start the day, sending the Dow Jones Industrial Average down nearly 360 points, before rebounding in the afternoon. The rally came after Treasury Secretary Steven Mnuchintold CNBC the most recent trade talks were “constructive” and President Trump tweeted that tariffs “may or may not be removed” depending on future negotiations.

Blowing With the Stock Market

Trump's position on trade talks blows with the performance of the stock market. By Friday, Trump had had enough of the stock market declines, so the message of the Tweets was less aggressive.

Apple In Trade Crosshairs Again

With Trump's latest threats Apple and the iPhone Near Trade Crosshairs Again.

The round of tariff increases that hit Friday don’t directly affect iPhones, iPads, Macs or Apple Watches. But President Trump this week threatened a tariff of 25% on $325 billion in Chinese imports that haven’t previously been targeted by duties. Those would cover virtually all Chinese exports to the U.S., including Apple’s most important devices.

“Build your products in the United States and there are NO TARIFFS!” Mr. Trump said Friday on Twitter.

Apple has faced minimal impact from previous tariffs on about $200 billion in Chinese goods, which covered electronic circuit boards, computer chips, chemicals and other parts. However, the iPhone maker is among the companies most exposed to future tariffs because it assembles almost all of its products in China. Tariffs could add to gadget prices or cut into profits by forcing Apple to absorb the additional costs.

“If Trump actually goes the last round, they’re in big trouble,” Mary Lovely, an economist at Syracuse University, said of the iPhone maker. She said a host of other consumer-facing products would face the same fate, including apparel and electronics.

Shares of Apple fell 7% this week, as trade concerns mounted. They finished Friday at $197.18

iPhone sales sank 16% in the first half of its fiscal year. Many iPhone owners are holding on to existing devices, turned off by higher prices and less interested in new features.

In the U.S., a tariff of 25% on a Chinese-made iPhone XS could exacerbate that problem by adding about $160 in costs to the $999 device, according to Morgan Stanley. Apple could either pass that cost on to consumers—potentially causing people to hold off on buying new iPhones—or absorb it, reducing its per-share earnings by 23% in fiscal year 2020, the firm estimates.

Money Left Over

Beyond Idiotic

Trump says he will use those tariffs to buy more soybeans and feed the world's poor with money left over.

Clearly, that Tweet is beyond idiotic prompting me to write Dear President Trump: Stop the Damn Trade Lies.

Mike "Mish" Shedlock

Comments (26)
No. 1-15
Mish
Mish

Editor

Heading back to Chicago today after two weeks in the Utah desert. Arches and Canyonlands NP.

AWC
AWC

Looks like the Fed is going to have a lot of new taxes "tariffs" to monetize. Those, as well as a lot of pensions. But, hey, consumer price inflation is what they all think will make America great again, so here goes.

Augustthegreat
Augustthegreat

The most idiotic president ever!

Casual_Observer
Casual_Observer

From Seinfeld..

We're not talking. We're just talking. MOONEY: You understand what we're talking about?

GEORGE: So you're talking...

MINKLER: No, no.

MOONEY: We're not talking. We're just, talking.

thimk
thimk

this is true folly, China adds very little costs to the Iphone final product. the Apple supply chain is far reaching. to totally produce the Iphone here state side is absurd.

Greggg
Greggg

In the middle of all this, Trump's Presidency looks like it's in serious trouble.

Menaquinone
Menaquinone

Crazy like a fox. China imports 1/3 of world soybean production. USA produces 1/3 of the worlds soybeans. Soy is the essential ingredient for production of meat and fish. If Trump can dispose of US soybeans the Chinese won't be eating meat and fish. Burning the soybeans would be "inhumane". But giving soybeans to the poor will starve the Chinese just the same.

Carl_R
Carl_R

The one thing you can be sure of is that with a 25% tariff, we will see a boom in smuggling. Yes, that still happens. Back when Bush put a tariff on certain items, I saw boxes of things labeled "Made in China", and over the top of that was placed a sticker than said "Made in Canada". My guess is that they were made in China, exported to Canada, where a sticker was added to the box, and they were shipped on to the US duty free as if they were actually made in Canada.

truthseeker
truthseeker

Ok Mish promise me you didn’t jump into bitcoin ok?

dltravers
dltravers

I would rather have a high paying job in manufacturing with medical benefits and pay more for goods than have a low paying job and buy cheap shoddy merchandise from China that used someone else's intellectual capital for design.

My daughter used to manage 5 factories in China for a retailer. Her boss wanted the cheapest cost possible. On a trip to China he was show the cheapest cost possible, a factory full of children under ten working. He left crying and he was the most narcissistic person I have ever met. Aa person totally oblivious to anyone but himself.

Somehow the eggheads always forget that we are human beings but their day will come when their body drops and their spirit move on for review of their life on Earth.

Webej
Webej

Next thing you know the Chinese tariffs collected will move the federal budget deficit into surplus, and Trump will be forced to choose between abolishing the federal income tax or paying down the national debt. Soon enough the trade balance will flip as America exports American made iPhones and garments to the rest of the world.

Realist
Realist

I hope that Trump follows through on all his tariff threats with China, Europe, etc. The US economy will certainly slide into a recession as a result. I have been raising my cash position substantially in the last two months and I’m hoping for a big pullback in both stock markets and real estate markets. Unlike Mish, I am not buying gold.

I can already predict the comments you will hear from his brain dead supporters : We will gladly suffer a recession in order to fix those darn Chinese and Europeans! Thank Trump for President Trump, er Thank God for President Trump.

Irondoor
Irondoor

I see you have a story about why Warren Buffet would not locate a business in Illinois. How about an article on why anyone would do business with the Communist Chinese? Did we do business and negotiate trade agreements with Hitler or Karl Marx or Lenin? No, because they were antithetical to our way of life. Stop all trade with Red China. Roll back the island "stationary aircraft carriers" in the South China Sea (the ones that Xi promised Obama that China would not "militarize"). Formalize our military and political relationship with Taiwan. Form an active defense protective alliance with Taiwan, Japan, S Korea, Australia, Vietnam, and India. Push back on China. If not us, then who? If not now, then when? Sure as hell not when some bumbling Democrat wearing a skirt or a same-sex "husband" takes office.

Menaquinone
Menaquinone

If you buy Made In China then you pay the tariff. I'm not buying.

Matt3
Matt3

We should just continue to let the Chinese steal our intellectual property until such time as we don't have anything left worth stealing. The no tariffs policy has worked well for about 1% of the county and allowed the politicians to grow ever more wealthy. That's why DC, which produces nothing, has so much wealth. Boeing is giving away technology for short term profits as have most of our companies. If Apple is smart, they will get out of China. The market in China is starting to drop as the Chinese go ahead and copy, steal IPhone technology.