With US President Donald Trump ramping up trade pressure on China, inflation accelerating and the emerging markets contagion spreading, equity markets have started showing signs of nervousness.
All major US stock indices fell for the week that ended on Friday September 7, after President Trump said the US had tariffs ready to go on an additional $267 billion in Chinese imports. These tariffs will be on top of duties of $200 billion in imports his administration is already considering. The administration will act on the $200 billion “very soon depending on what happens,” Trump told reporters on Air Force One. “I hate to do this, but behind that there is another $267 billion ready to go on short notice if I want.”
The impact of these macro threats is slowly trickling down to individual stocks and investors have started to price in the possibility of a full-blown trade war between the two largest global economies.The world’s most valuable company, Apple (NASDAQ: AAPL) is among the first now openly cautioning that China tariffs will hurt their business.
Apple shares (NASDAQ:AAPL) erased their 1% gain on Friday and closed about 1% lower as details of the company’s letter to the Office of US Trade Representative were made public in a Bloomberg report. According to the content of the letter, the proposed US tariffs on $200 billion worth of products imported from China will raise prices for some of its popular consumer goods such as the Apple Watch and AirPods headphones. “Our concern with these tariffs is that the US will be hardest hit, and that will result in lower US growth and competitiveness and higher prices for US consumers,” Apple said in its letter, without elaborating how these tariffs would hurt the company’s profitability.
Apple generated $9.6 billion in sales in China in the fiscal third quarter, accounting for 18% of its total revenue in the period. Apple shares might come under more pressure this coming week if President Trump decides to act on his threats.
In the technology space, another stock to watch this coming week is Alibaba (NYSE:BABA), whose co-founder Jack Ma may step down from his role as executive chairman as early as Monday, according to media reports. Ma will leave the company to focus on philanthropic approaches to education.
Alibaba shares fell more than 1% in after-hours trading on Friday following the news, adding to losses of about 5% during the past 12 months. During his time as chairman, he helped guide growth at home and overseas. In the most recent quarter, sales at China’s biggest e-commerce company climbed 61% to 80.9 billion yuan ($11.8 billion) in the three months ended June, matching analysts’ average estimates.
Ma’s departure, along with the intensifying trade war with the US, may put further pressure on Alibaba’s stock which has already missed the tech stock rally this year.
There was no hiatus for shareholders last week as Tesla (NASDAQ:TSLA) losses continued. And there's no sign that relief is on the way. Tesla shares plunged as much as 9% on Friday after news of a pair of C-suite executive departures broke and a video showing CEO Elon Musk smoking pot while being interviewed for a podcast went viral.
As of Friday's close, the stock had lost more than 11% for the week and 32% in a month, hurt by the company’s failed attempt to go private and Musk’s public relations disasters. Tesla chief accounting officer, Dave Morton, said Friday he had resigned as of Tuesday, citing intense public attention at the car-maker which he joined just a month ago. "Since I joined Tesla on August 6, the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations," Morton said in a statement. "As a result, this caused me to reconsider my future."
The company's HR chief, Gaby Toledano, is also leaving the company, Bloomberg reported as last week came to a close. Investors should brace for another tumultuous week ahead. No one knows exactly what Elon Musk has up his sleeve next, nor how that will surprise—and of course impact—investors. Nevertheless, there are clear signs pressure is building for the Tesla board to stop this self-inflicted public relations crisis from getting even further out of hand.
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