Trump eyes more China tariffs, pushing total upwards of $500bn

Asian markets are tested today after US President Trump has dealt a blow on coming to terms with China over conflicting trade issues. — Reuters pic

In an interview with the Wall Street Journal four days ahead of his high-stakes meeting with Chinese President Xi Jinping in Argentina, Mr Trump said it was "highly unlikely" he would accept China's request to hold off on the increase, which is due to take effect on Jan 1.

"It is unclear whether the incremental tariffs would be at 10% or 25%, but assuming a 10% rate, we estimate an earnings per share impact of ~$0.33 (~2.5%) on our baseline F2019E EPS of $13.06 assuming implementation in March quarter and assuming Apple would absorb the incremental costs rather than passing them on to consumers". The vast majority of iPhones and other Apple products are built in China and then exported globally.

In New York, Apple Inc was down 0.5 per cent after Trump said tariffs could also be placed on laptops and iPhones imported from China.

On Monday, the president said the USA did not approve of escalating violence between Russian Federation and Ukraine, but didn't specifically call out Russia's behavior.

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Cupertino, California-based Apple, which already lost 20 per cent of its value in a tech market rout since October, risks further losses when tariffs on its devices come into effect on January 1 next year. An Apple spokesman did not immediately respond to Reuters' queries. Slapping Apple with 10% tariffs might lead to one of two things - either Cupertino moving part of its manufacturing to markets like Taiwan and Vietnam, or the more likely variant of increasing the phones' prices accordingly.

Except for a small number of older iPhone models manufactured in Brazil and India, the bulk of Apple's products are assembled in China from where it is shipped out globally for sale. RBC also lowered its price target on the stock to $235 from $240. Earlier this year, Apple said products like the Apple Watch and AirPods would be affected before the USA said it wouldn't impose taxes on such items.

Additionally, existing U.S. duties on Chinese imports are set to rise from 10 percent to 25 percent in January, affecting $200bn worth of imported goods.

USA stock options traders are braced for a surge in volatility around the G20 summit. "Combined with last week's harsh report from the US trade representative, investors have only the flimsiest hope that the Trump-Xi meeting in Argentina will amount to more than a hill of soybeans". Some components, like the smartphone's glass cover, are manufactured in the USA and shipped for assembly in China. "Combined with last week's harsh report from the U.S. trade representative, investors have only the flimsiest hope that the Trump-Xi meeting in Argentina will amount to more than a hill of soybeans". I'm not here to critique or second guess the Chinese economy but most observers believe China to be in a slump, whereas the United States is in a very strong, solid position going into this summit.

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