Daily Management Review

Apple And Other U.S. Companies Likely To Be Impacted By Latest Chinese Tariff Plans


04/05/2018




Apple And Other U.S. Companies Likely To Be Impacted By Latest Chinese Tariff Plans
There is everything to worry for many blue-chip American companies as the United States and China are apparently on a collision course in a potential trade war.
 
After China announced on Wednesday about its plans to impose tariff on about 100 U.S. made products imported into the country worth $50 billion, there was a sharp fall in the U.S. markets before they stabilized later in the day. 
 
Apple, Boeing, Caterpillar, Intel and other multinational companies listed in the Dow could face problems because of this because such companies have large business interests in China and the China is an important market for their products.
 
In the latest quarter, the sale of iPhones, iPads and Macs to Chinese consumers accounted for about 20 per cent of the total revenues of the company and touched $18 billion. there was an initial dip of 1.5 per cent in shares of the company following the news from China.
 
Last year, China accounted for $12 billion inn revenues for Boeing which is nearly 13 per cent of the total volume of sale. The company is also expecting to sell a further 300 aircrafts to Chinese airlines following agreements announced by the company in November, worth $37 billion.
 
At that time, Boeing had even mentioned that the deals were signed in the presence of China President Xi Jinping and U.S. President Trump, the news forced its shares to drop 3 per cent.
 
On the other hand, the Chinese boom in construction has been beneficial to Caterpillar. Caterpillar’s heavy equipment including bulldozers, fork lifts and excavators are required by Chinese companies for construction purposes. The company expects its sales in China to increase in the current year., according to a statement published in the last annual report of the company. While the company does not issue any separate revenue break up for its China business, the company noted that 21.5 per cent of the total revenues of the company was accounted for by the business from the Asia/Pacific region.
 
There is also significant presence in China of some other U.S. tech companies such as semiconductor maker Intel, Texas Instruments, Nvidia, Micron and Qualcomm.
 
All of these companies have their own manufacturing units in China and the products that are produced there are sold to Chinese companies who uses them or the phones, computers and other gadgets that they manufacture. Last year, about a quarter of the total sale for Intel was generated in China. There was a drop of 2 per cent in the share value of Intel after the China news. Shares of other tech companies also fell.
 
The potential impact of the proposed Chinese tariff would also impact other U.S. companies that have benefitted from the growth of the middle class in China.
 
Last year, there had been strong demand for the for Cadillacs and Buick models of GM and the sales reached a record high for the company – including those of its joint ventures, with sales of over 4 million vehicles. 
 
Starbucks is also doing well in the Chinese market. The sale growth of the coffee chain in China is faster than that for the company the U.S. and other developed economies and the Chinese operations accounted for 14 per cent of the total revenues of the company. 
 
Other companies that could be hurt significantly by the China tariff regimen include Nike, 3M, casino giants Las Vegas Sands and Wynn Resorts.
 
(Source:www.money.cnn.com)






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