Trade war, day 182: Weak China sales for Apple
Apple CEO Tim Cook wrote a letter (full text; CNBC report and interview with Cook) to investors yesterday, January 2, that reported slowing sales particularly in China.
While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.
CNBC notes that the company “lowered revenue guidance to $84 billion, down from the $89 billion to $93 billion it had previously projected” for the first quarter of 2019. Tim Cook additionally told CNBC:
It’s clear that the economy began to slow there [in China] for the second half [of 2018] and what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy.
Today, stocks reacted, per CNN:
- “The Dow dropped 660 points, or 2.8 percent.”
- Apple “plummeted 10 percent in its darkest day in six years.”
- “The Nasdaq plunged 3 percent, closing back in bear market territory.”
- “The S&P 500 shed 2.5 percent, led lower by tech and industrial stocks.”
- The other primary factor in stock volatility was that December saw “the biggest one-month decline in US factory activity since the Great Recession.”
A top White House economic advisor framed the news as a plus for Trump’s leverage against China in the trade war.
- “It’s not going to be just Apple…There are a heck of a lot of U.S. companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China…That puts a lot of pressure on China to make a deal,” said Kevin Hassett, chairman of the White House Council of Economic Advisers.
In other U.S.-China news, and updates on the Canadian detentions:
- Renewed travel warning
US issues China travel warning about ‘arbitrary’ law enforcement, amid tensions over arrest of Huawei’s Meng Wanzhou / SCMP
“The travel advisory follows the detention last month of two Canadians in China, which has accused them of harming China’s security.”
- Totally not arbitrary detention
Detained Canadians ‘without a doubt’ violated the law, Chinese prosecutor says / Global News (Canada)
“China’s top prosecutor said on Thursday that two Canadians detained after Canada arrested a Chinese technology company executive had ‘without a doubt’ violated the law.”
- Chinese consumers still like fancy Canadian coats
Chinese consumers indifferent to diplomatic spat between China and Canada as “Canada Goose boycott” backlashes / What’s on Weibo
Previously in The China Project’s trade war coverage:
