Apple Inc. had its biggest weekly decline all year which is causing analysts to worry. The tech giant is particularly feeling the pressure after President Trump intensified his rhetoric towards China. Shares are down as much as 9 percent for the week.
The tech giant is leading the weekly plunge the S&P 500 has been experiencing losing around 9 percent this week while the S&P shed 4 percent.
This week’s closing would be the company’s worst since the five-day stretch which ended on Dec 21. It was then that U.S. equities were tumbling and many believed a bear market was incoming. The market has since obviously rebounded, but it may be coming back to bite investors again.
Apple is ultimately concerned over the escalating U.S. and China trade war. Given that most of its production line is based in China, the leading phone-maker is especially sensitive to these trade talks. China made up nearly 20 percent of Apple’s 2018 revenue.
In its latest move, the U.S. government has raised some $200B on goods coming from China. Due to the tariffs, we could see prices increase for Airpods, charging docks, Apple Watches, and other products according to Rosenblatt Securities analyst Jun Zhang. In the worst case scenario, Apple could see its earnings drop by a quarter according to analysts.
Apple may be looking to change its supply-side strategy altogether as a result of the trade war. In February of this year, the company filed with the SEC an idea for a new blockchain-based system which would allow for ‘responsible sourcing’ for its products. The system was intended to upend its global network of suppliers, likely away from China. The purported reason was for ‘human rights,’ but one could bargain that it is more likely pursuing alternative sourcing options due to the tenuous geopolitical situation.
Do you believe Apple will be further hit by President Trump’s trade war? Let us know your thoughts in the comments below.
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