Trump tweets out an order to U.S. companies that could devastate Apple
Shares of Apple plunged nearly $10 or 4.62% today after U.S. President Donald Trump disseminated a tweet “ordering” U.S. companies to stop doing business in China. While the president is not a dictator and cannot just tweet such an order, the fear is that he will do something within the powers of the president and force U.S. companies to pull out of the country. Apple designs its products in the U.S. but assembles them mostly in China.
While Trump has been worrying about an indicator called the inverted yield curve that has a great record at forecasting recessions (I’d be happy to explain this in the comments section if anyone wants to know), what he doesn’t realize is that hiking the tariffs are going to cause more damage to the U.S. economy. The tariffs are nothing more than an import tax that U.S. companies pay when importing the targeted goods from China. These firms can either eat the additional costs themselves and hurt their profit margins, or pass all or part of the tax along to consumers in the form of higher prices. Apple has been eating the tax imposed on imports of certain iPhone and iPad cases in order to keep the price to U.S. consumers unchanged. But it isn’t clear what the company will do with the extremely popular Apple Watch and AirPods. New versions of both could be unveiled on September 10th.
U.S. companies and consumers are the ones hurt the most by the tariffs imposed by Trump
What set off this trade war is the large U.S. trade deficit with China. Most economists will tell you that this merely means that American consumers are wealthier than their Chinese counterparts and can afford to buy more goods from China than they buy from the U.S. However, President Trump has considered the deficit to be a scoreboard indicating that the U.S. was losing some sort of trade game with China. In May, he lied by posting a tweet stating that because of the tariffs, millions of dollars were flowing into the U.S. Treasury from China. Any money flowing into the Treasury from the tariffs is from U.S. companies like Apple.