- Apple issued a surprising warning about its upcoming quarterly earnings on Wednesday, lowering its revenue target substantially.
- Apple CEO Tim Cook placed a significant portion of the blame on China’s economic slowdown, which Cook said was caused in part by President Donald Trump’s trade war.
- “We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” Cook wrote.
- Apple is an example of how tariffs can indirectly harm American companies.
In an interview with CNBC on Wednesday, Cook said tariffs imposed by the US and China on products from the opposite country contributed to an economic slowdown in China. The Chinese economic slowdown in turn decreases retail sales in the country and hurt Apple’s overall business.
“And what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy,” Cook said. “So we saw as the quarter went on things like traffic in our retail stores, traffic in our channel partner stores, the reports of the smartphone industry contracting, particularly bad in November. I haven’t seen a December number yet, but I’d bet it would not be good either.”
Cook also highlighted the trade war’s impact on Apple’s sales in a letter to shareholders announcing the reduced revenue target.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” he wrote.
In total, Apple estimated that revenue for the company’s first fiscal quarter would come in around 7.6% lower than a previously expected $84 billion. The original guidance called for revenues between $89 billion and $93 billion.
While Apple did not place complete blame on the trade war – the company also cited the strong US dollar, reduced battery replacement prices, and more – the tariff battle between the US and China appears to have taken its toll on the tech giant.
There may still be more worries on the trade front for Apple, as well. Current US tariffs on Chinese goods do not include many consumer electronics like those manufactured by Apple, and some Apple products were dropped from a preliminary list of goods that were subject to tariffs in September.
But President Donald Trump told The Wall Street Journal in November that the iPhone and other Apple products could be hit by the next round of tariffs, which would cover the $255 billion in Chinese products not currently involved in the trade war. Apple previously warned that tariffs on their products would harm the company.
The US and China agreed to a trade war truce at the start of December and have put any additional tariffs on hold. But that truce is only set to last until March 1. And Trump’s lead trade negotiator, US Trade Representative Robert Lighthizer, reportedly wants to deploy additional tariffs to pressure the Chinese.
Regardless of the trade war’s future, Cook’s statements make it clear that Trump’s trade war with China is indirectly harming one of the America’s largest companies. The announcement is also an example of the highly integrated supply chains US companies use – and how tariffs can disrupt those firms’ ability to do business.
In response to the news, Apple’s stock fell by over 7% in after-hours trading to $146.40 a share.