Tariff Delay is Big Win for Apple and Other Tech Companies

This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

The announcement today that the United States would wait until December to raise tariffs on China sent chipmaker stocks up across the board.

Tariff Imposition

The trade war between the United States and China has only seemed to get worse between the two countries in the last 12 months. Initially, it was part of President Trump’s campaign to keep jobs within the United States by accusing China of unfair practices including currency fixing. The tariff impositions began early 2018 with solar panels and washing machines made in China; a year and a half later and escalations have affected every industry from agriculture, steel and aluminum and most importantly to this article consumer electronics.

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We reported August 5th China’s retaliations including devaluing their own currency, caused the worst trading day in the United States for tech stocks so far in 2019.

The Nasdaq, peaking over 8300 fell to 7700 on that day, and since then has slowly climbed back up to 8000, which is an important number for Wall Street like the Dow Jones hitting 25000 earlier this year.

The latest round of tariffs which were to be imposed September 1st would have been a 10% levy on most electronics that did not already have a tariff imposed such as cell phones,  laptop computers, and video games. These tariffs would have been imposed just before the holiday shopping season in the United States begins; affecting every electronics company in the process.

Impact on Stocks

When the news went live Apple (NYSE:AAPL), Micron (NASDAQ:MU) and Alibaba (NYSE:BABA) stock prices all rose 5% immediately; with Best Buy (NYSE:BBY) climbing 6%, Qualcomm (NASDAQ:QCOM), eBay (NASDAQ:EBAY), Intel (NASDAQ:INTC) gained 3%. The news although promising for the tech sector still highlights the volatility and uncertainty in the market surrounding trade between the two countries. It is not just the United States and China that are caught in the trade war, we wrote two weeks ago about the impact the trade war is having on Singapore, which helps explain why Micron stock rose so sharply on the news.

While the short term news was welcomed by investors, the long term outlook is still questionable; the market is already controlling for risk in the prices of stocks. The outcome on or before December 15th of implementing more tariffs on China will dictate future talks because the United States has already just ceded tariffs on consumer goods during their busiest shopping season of the year which as the stock moves show today is a big win for manufacturers and consumer electronics companies. Apple, for instance, noted the impact in June that could potentially hit their company and is expected to launch new hardware this fall that would have been affected by the tariff. We’ll be following this story closely as it has political and economic effects throughout the world and will continue to develop in the next few months.