On Twitter against China's plan to introduce retaliatory tariffs on US products, President Donald Trump made this claim: "Our major US companies are hereby ordered to immediately start looking for an alternative to China , including bringing your companies HOME and making your products in the US. "
The tweet raises many questions, including whether the president has the authority to" order "US companies to find alternatives to manufacturing in China. Shares fell sharply across the board but technology companies were among the hardest hit.
His idea sounds good in theory – let's make American technology production great again! – but it ignores the complexity and interconnection of global supply chains. In fact, the president's demands are virtually impossible to fulfill.
US technology companies rely on China for components, for manufacturing and s China is the world's second largest economy, with the largest population, and the largest production base. It is also the top exporter and, after the United States, the world's largest importer.
While the president may not like it, the fact is that the two nations are inextricably intertwined. Still, the demand is dragging his lower tech stocks.
The poster child for US-China trade tensions remains
(ticker: AAPL), which generates close to 20% of revenue there, and has claimed to have created 4.8 million jobs in China in industry, apps and other areas. The company also operates more than 40 stores in China.
Companies like Apple rely on contract manufacturers in China for many reasons. The cost and abundance of labor is one reason, but so is the capacity and sophistication of production. As much as the White House thinks that companies like Apple are going to get out of China, what he asks would be both impossible and financially disastrous.
The President's demands require signals that any thaw of the trade war with China is far away. This is not good news for the many technology companies that manufacture, buy parts or sell goods there.
Apple shares were down 4% Friday afternoon. Chip shares, which have high exposure to China in terms of revenue, were also hit hard.
(INTC) was down 3%,
(MU) fell 3.5%, and
Advanced micro devices
(AMD) fell by 5%.
Technical hardware vendors were also down:
(DELL) was of 5.3%, and
(CSCO) fell by 2%. Among Chinese stocks,
Alibaba Group Holding
(BABA) was down 3.5%, while Hon Hai Precision Industry (HNHPF), a Taiwan-based company with a lot of production capacity in China, was down 2%.
dominated by technology stocks, was down 2.7%, exceeding respective losses of 2% and 2.2% in
Dow Jones industrial average
Write to Eric J. Savitz at firstname.lastname@example.org