Tim Cook visits Luxshare factory in China in 2017 – Image Credit: Apple
Apple’s stock will face another tumultuous day as markets fear China’s and the European Union’s reciprocal tariff increases could get another Trump reaction.
The tit-for-tat tariff battle has wreaked havoc on the stock market, with the valuation of many companies shrinking over a matter of days due to the Trump administration’s sweeping tariffs. This has naturally included Apple, which is set to face another day of stock market turmoil.
At the close of markets on Tuesday, Apple was at $172.42 following four days of rough trading. However, pre-market trading brought the price to an even lower level, hovering at around $169 before starting the trading day marginally up at $172.18.
At the start of trading, Apple jumped up about $3, in a similar trajectory to Tuesday’s gains before losses.
Overall, the stock nosedive has even dislodged Apple’s crown of being the most valuable U.S. company. At market close on Tuesday, Apple had a market capitalization of $2.59 trillion. Long-time historical rival Microsoft took the top spot with a market cap of $2.64 trillion.
With the markets reacting poorly to the tariff battle, it may be some time before Apple recovers and becomes the biggest company in the U.S. once again. That does depend on what happens in the coming days between the U.S. and China.
Escalating tariffs
After introducing a 34% tariff rise on U.S. imports from China, there was an expectation of a rebuttal from China. However, it’s now turned into an escalating battle of tariff levels.
Following the first 34% rise from the United States, China responded with its own reciprocal 34% tariff on imports from the U.S. Not to be outdone, the Trump administration threatened to up the total tariff by 50% if China didn’t back down.
On April 9, after China refused to take back its tariff increase, the U.S. implemented its extension, bringing the total import tariff for China to 104%. China’s response to the extra increase is to mirror the actions of the United States, and increase its tariff on imports from the U.S. to 84%, up 50%.
China’s State Council Tariff Commission referred to the U.S. 50% threat as a “mistake on top of a mistake” when announcing the increase in a statement.
The ball is now back in Trump’s court, and the world is awaiting his response to the escalation. It’s highly possible that a further tariff rise could be on the way, continuing the battle and more severely impacting the world’s financial markets.
And, just before the market opened, the European Union announced its own retaliatory tariffs.
“The EU considers US tariffs unjustified and damaging, causing economic harm to both sides, as well as the global economy. The EU has stated its clear preference to find negotiated outcomes with the US, which would be balanced and mutually beneficial,” the European Commission said on Tuesday morning.
Like China, the increase in tariffs starts on April 15. A second grouping will be applied on May 15. Details about percentages are sparse at press time.
China is negotiating in the court of public opinion. The EU says that it is open to negotiations.
Potentially more damaging
Apple’s pre-market stock activity is certainly driven by the uncertainty of tariffs. With Apple’s supply chain largely based in China, a lot of its products face being hit by the tariffs.
It has worked to try and get around the severely high China-specific tariffs, including stockpiling products in the United States that won’t be affected by them. It can also work to improve supply chains in other regions that are affected by far lower tariffs.
Despite Trump’s insistence that companies could move manufacturing to the U.S. to avoid tariffs, this is something that will take Apple years to accomplish. Potentially far longer than the lifespan of these current tariff levels, and beyond the end of Trump’s presidential term.
Even so, the nature of not knowing where the tariff tiff between the U.S. and China will lead to, nor when it could end, is weighing heavily on the minds of investors in general.
