The trade war between the US and China is heating up and with additional rounds of tariffs being declared, several companies across different sectors are feeling more heat. Some have made and others are on the verge of making difficult decisions that are likely to impact US customers negatively.
The first on the list is Apple (AAPL), which has been on the trade war radar from the very beginning. Apple gets a meaningful portion of its revenue from China and assembles several of its products in the Asian country.
In the tariffs battle, Apple could see impacts to its Apple Watch, AirPods and Mac Mini products, among others, forcing the company to raise prices for these devices. These products belong to the Other Products segment, which saw revenue growth of 37% during the most recent quarter.
Analysts have different opinions on the issue. While some estimate the price hikes could go up to 20% and harm profitability, others believe these hikes will not have a drastic effect on the company’s profits.
Some analysts feel Apple is in a position where it can safely absorb the cost increases without passing them on to customers while a few believe the tech firm might split the impact and pass on a small portion to customers. There are also those who believe that customer loyalty towards Apple’s products will keep the company safe enough in this scenario regardless of any price increases.
President Trump wants Apple to build new plants and make its products in the US to avoid the beating from tariffs but this appears easier said than done considering that Apple has faced shortage of talented labor in the US before and is likely to still face them in the current scenario with regards to rules pertaining to bringing in talent from other countries.
Apple stock is up 2.2% as of 1:50 pm ET.
Another tech company that has raised concerns on the impact of tariffs is Cisco (CSCO). The company said it will be forced to raise prices as the tariffs are likely to hit its networking products meaningfully. Cisco has teamed up with other tech companies that produce networking equipment to request a solution for the tariffs and is discussing the matter with government officials.
In the meantime, the company is looking to bring about changes to its supply chain to make it more effective to deal with the situation. For its most recent quarter, Cisco reported a 6% growth in revenues along with a 57% increase in profits. Three of the company’s four product categories posted revenues increases during the quarter.
The tariffs war is having an effect on the automobile industry too. Ford (F) said it would stop selling the Ford Focus model in the US. Over the past two years, Ford moved the production of the Focus from Michigan to Mexico and then to China all in an effort to lower costs and increase profits for models that were gradually losing its popularity in the US.
Now due to the new tariffs, the carmaker has decided it would be better to produce the model in its Chinese and German factories for sale in Asia and Europe respectively. President Trump offered his usual solution, which is to produce in America, but this would hardly be beneficial for the company as it would have to face higher production costs due to the tariffs on steel and aluminium.
Instead of going to all that trouble for a car that does not seem to generate the interest it used to, Ford chose to simply remove the Focus from the US market.
For its most recent quarter, Ford reported declines in revenues and profits and the company. The company has also been hit with a number of recalls too recently.