As markets digest the Trump Administration's plans -- amid ongoing trade talks that could still yield a deal -- to raise U.S. tariffs on $200 billion worth of Chinese imports from 10% to 25%, much of the discussion about potential implications for U.S. tech companies has focused on the retaliatory measures that Beijing could respond with. These measures run the gamut from tariffs on American tech exports, the refusal to approve M&A transactions involving U.S. acquirers or (though it has refrained from such moves to date) calls for boycotts of U.S. goods.
However, even if such actions aren't carried out, continued trade tensions would by themselves be a problem for tech firms with strong Chinese exposure, judging by recent comments from Apple (AAPL) and various chip developers.
During Apple's April 30th earnings call, Tim Cook noted that while Chinese iPhone sales were pressured during his company's March quarter (Apple's "Greater China" revenue fell 22% annually to $10.2 billion), sales trends improved meaningfully during the final weeks of the quarter. This was partly attributed to price cuts and improved trade-in and financing offers, but also partly to government stimulus programs and "an improved trade dialogue between the U.S. and China," which Cook said has improved consumer confidence.
Meanwhile, a long list of chip suppliers -- the group includes the likes of Intel (INTC) , Nvidia (NVDA) , STMicroelectronics (STM) and NXP Semiconductors (NXPI) -- have reported seeing soft Chinese demand that they've generally attributed to inventory corrections and macro uncertainty. Automotive, industrial and data center chip clients have all been reported to be ordering cautiously.
In such an environment, the mere prolonging of trade tensions that have affected the buying habits of Chinese consumers and businesses is enough to cause headaches for many tech companies (U.S.-based or otherwise) operating in China. And at a time when the shares of many tech companies have risen sharply from their December lows amid widespread hopes for a trade deal, equity markets would likely feel the effects as well.
