Daily Management Review

Trump's trade war will hit high-tech companies


03/08/2018


Plans of the Donald Trump administration to impose customs duties on Chinese imports alarmed the global high-tech sector.



Jon Bragg via flickr
Jon Bragg via flickr
Analysts predict that in the worst case scenario, the US will impose import duties on a wide range of Chinese goods, from footwear and clothing to electronic gadgets.

Apple, Amazon and other American high-tech companies, whose products are assembled in China, may suffer greatly from this decision. Chinese consumer electronics manufacturers, including Xiaomi and Lenovo Group may also experience serious difficulties as they are seeking to gain a foothold in the US market.

The White House is considering possibility of combining import duties with restrictive measures on Chinese investments in the US, which Washington considers a potential threat to national security. This will exacerbate the already existing problems of consolidation in the strategically important semiconductor industry.

On Tuesday, Apple’s shares fell about the same range as other companies' shares, after Gary Cohn announced his resignation from the post of chief economic adviser to Trump, prompting investor concerns about tariffs and a potential global trade war.

Cohn, the former head of the Goldman Sachs Group, opposed customs duties and was seen as one of the few reasonable experts in an unpredictable administration.

According to observers, if Trump imposes duties on all goods produced in China, including those developed in the US, then Apple and other consumer electronics manufacturers will suffer most of all.

The largest US equipment manufacturers - from Intel to Dell - also strongly depend on China, which became a global factory due to government incentives and cheap labor.

It's not clear yet whether Apple will be marked as an importer of Chinese goods. The most valuable company in the world has a number of key suppliers in this Eastern country. Apple releases most of its gadgets, including the iPhone and iPad, at Hon Hai Precision Industry, Inventec, Wistron and Jabil.

Top manager of Apple’s one of the leading suppliers told Bloomberg that more time is needed to assess the possible consequences, while he does not exclude the slide into a "large-scale trade war."

Meanwhile, according to analyst Rosenblatt Securities Rong Chang, customs duties are likely to be aimed at Chinese manufacturers, rather than letting out their gadgets in the Middle Kingdom American companies.

Shares of Lenovo fell 1% on the stock exchange in Hong Kong, while ZTE, one of the most successful Chinese brands in the US, fell 1.8%.

The Chinese company Huawei has been trying to enter the US smartphone market for more than a month, but US lawmakers are persistently denying it, as a result of which the telephone operators AT & T and Verizon have canceled the deal with Huawei for the sale of its latest models in the US.

source: bloomberg.com






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