By CCN Markets: Apple stock helped send the Dow Jones higher on Monday. Shares of the iPhone maker are up nearly 3% after CEO Tim Cook made a “very compelling argument” about why President Trump should reconsider his tariff regime.
Trump’s trade war with China has an avalanche of negative repercussions for Apple because it assembles its flagship device – the iPhone – on the Chinese mainland. So when Trump threatened to impose a new 10% tariff on $300 billion of Chinese goods, including smartphones and other consumer devices, Apple stock plunged.
That’s not surprising. Dan Ives of Wedbush Securities forecasts that iPhone sales could drop anywhere between 6 million and 8 million units in the US and dent Apple’s earnings to the tune of 4% if the new tariffs are imposed.
But there’s another way the trade war has the potential to dent Apple’s sales.
The trade war has led to an economic slowdown in China, as evident from the 4.8% industrial production growth reading in July. This was the metric’s worst reading in 17 years. Weak factory activity could eventually lead to a fall in consumer spending in China, and this could translate into weak iPhone sales on the mainland.
President Trump told reporters that he was sympathetic to Tim Cook’s argument that the China tariffs would hurt a US company – Apple – while helping its foreign rival Samsung.
Trump said that he is “thinking about” Cook’s plea, but it is difficult to gauge what exactly he is thinking. If he is thinking that the trade war needs to end so that Apple can compete with Samsung on an equal footing, then Cook – and AAPL shareholders – are in luck.
But if the tariff-touting Trump unexpectedly decides that he needs to impose duties on South Korean goods to even the playing field, Cook’s gambit could open an entirely separate Pandora’s box.
Apple stock last traded at $212.01 for a session gain of 2.67%.