China to retaliate against US Tariffs. Tech companies most likely to get hit. Companies such as Apple (APPL US), Skyworks (S\WKS), Qualcomm (QCOM), Nvidia (NVDA US) and Micron (MU US) got big exposure.
President Trump announced post close on 17th of September that US will impose 10% tax on about $200bn worth of goods. CNBC writes;
President Donald Trump will impose 10 percent tariffs on $200 billion worth of Chinese imports, and those duties will rise to 25 percent at the end of the year.
President Trump continued in statement saying;
Further, if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.
Right away the Chinese responded by saying;
“In order to safeguard its legitimate rights and interests and the global free trade order, China will have to retaliate as a response,” a statement from the ministry said.
If one looks at of the $500bn that the US imports from China are Cellphones at 14% of total share valued at $70bn. If one includes Computers and Telecommunications equipment the amount goes to $150bn or 30% of the total imports.
Source: US Census Bureau
As these are the biggest imports to the US and the Chinese have decided to retaliate, Cellphones, Computers and Telecommunications companies will get hit most.
Source: Goldman Sachs, CNBC
Some companies to keep an eye on as trade war escalates are companies such as Skyworks (SWKS), Qualcomm (QCOM), Nvidia (NVDA US) and Micron (MU US).
Already the Chinese have flexed their muscles, for example Micron (MU US), with banning them from selling range of products in China. WSJ wrote earlier this year;
A Chinese court temporarily stopped America’s largest memory-chip maker, Micron Technology Inc., MU -1.63% from selling a range of products in China, two rival manufacturers said, escalating a battle the companies are waging over allegations of trade-secrets theft and patent infringement.
State-owned chip maker Fujian Jinhua Integrated Circuit Co. and its Taiwanese partner,United Microelectronics Corp. UMC -0.79% , accused Micron in January in China of making products that violate their separate patents.
Of course there is the biggest elephant in the room, Apple (APPL US). The company even said so in a statement
“The proposed tariff list covers a wide range of Apple products and the products used in our U.S. operations: Tariffs increase the cost of our U.S. operations, divert our resources and disadvantage Apple compared to foreign competitors”
It is clear that if the Chinese retaliate harshly, a good part of technology companies including apple will be in the crosshair. As an investor and trader there will be various opportunities to trade all these situations.
Below is a chart showing a breakdown of US imports from China.
Summary: Chinese have promised to retaliate against US Tariffs. As US tech companies are the largest exposure to China + their products/suppliers emanate from China, there is high likelihood will get hit. Companies to follow are Apple (APPL US) Skyworks (SWKS), Qualcomm (QCOM), Nvidia (NVDA US) and Micron (MU US).