Stock markets remained cautious over the past two weeks fearing a trade war between the US and China over President Donald Trump’s announcement of import tariffs on Chinese goods. Investors’ worst fears come true today as China responded by proposing a $3 billion tariff on US goods entering China. The tariff, applicable on 128 products from beef to steel, is expected to be only the initial steps of China’s backlash.
Though Trump’s move is aimed at redressing the US trade deficit with China and boosting American manufacturing sector, numerous US companies are expected to suffer due to this proposal, given their vast operations in the world’s most populous country.
For example, Apple (AAPL) had reported a fifth of its total sales coming from China in the most recent quarter. A trade war is expected to have a catastrophic impact on its operations in the region. A worse possibility is China deciding to impose special duties on its products that are used in Apple devices as well as other US consumer products. Though such a decision could gravely impact Chinese companies, the possibility of such a move is quite high.
Most major American chipmakers have their manufacturing plants set in China due to a large number of buyers in the region. Chipmakers that are likely to get affected by a trade war include Qualcomm (QCOM), Micron (MU), Texas Instruments (TXN), Intel (INTC) and Nvidia (NVDA).
Boeing (BA) will also face some turbulence since about 13% of its last year’s total revenue came from China. China could also annul a $38 billion order awarded to the aircraft manufacturer in 2015, and even hand it over to rival Airbus.
Most major American chipmakers have their manufacturing plants set in China due to a large number of buyers in the region.
Casino operators including Wynn Resorts (WYNN) and Las Vegas Sands (LVS) have almost 50% of their operations in Macau, a city under the administration of China. Dow members 3M (MMM) and Nike (NKE), as well as S&P 500 components Starbucks (SBUX) and General Motors (GM), will also face the music of a trade war.
Apart from this, agricultural products will face the backlash, with the export of soybeans and Sorghum taking the biggest hit. China can also put pressure on the US companies operating in the country by bringing in more regulations on top of already existing rigid ones.