- Global markets rose this morning on news that President Trump’s impending tariffs on tech products would be exempted or delayed. However, there remains confusion over whether and when the White House will act against the smartphone, semiconductor, and device supply chain.
Today, investors in the U.S. markets will be grappling with the question of whether they believe Trump will impose steep tariffs on Big Tech’s China supply chain (as he said he would on Sunday) or whether he will back off (as the the U.S. Customs and Border Protection said it would on Friday).
Right now, stocks are trading up, so investors think the tech tariffs are at least being pushed off into the future or won’t happen at all.
Apple stock was boosted 5.45% in overnight trading and hit $208.95 this morning, premarket. Most of the company’s supply chain is trapped behind Trump’s tariff barriers on China and it would thus benefit if the tariffs end up not happening.
Here’s a snapshot from Fortune’s CEO Daily of where markets stood in early trading before the opening bell in New York:
- UK’s FTSE 100 was up 1.9% in early trading.
- The Euro Stoxx 600 was up strongly by 2.3% this morning.
- Japan’s Nikkei was up 1.2%.
- Hong Kong’s Hang Seng was up 2.4%.
- China’s SSE Composite was up 0.76%.
- The VIX fear index has fallen by 30% over the last five days.
- The S&P 500 closed up 1.8% on Friday and futures contracts for the index were trading up a further 1.5% this morning, premarket.
The U.S. may be in a weaker position in the China trade war than the president thinks, according to a Goldman Sachs note sent to clients yesterday, from analysts Andrew Tilton et al.
That’s because the U.S. is more dependent on imports from China than China is dependent on imports from the U.S., they say: “Our findings reveal that US reliance on Chinese imports is far greater than China’s reliance on US imports. For 36% of US imports from China (around $158 billion), the US depends on China for over 70% of its supply, indicating limited short-term flexibility for American importers to find alternative sources, even under substantial tariff pressures.
“In contrast, China’s reliance on US imports above the 70% threshold totals just $14 billion, while more than half of China’s imports from the US fall into categories where the US supplies less than 30% of China’s total demand.
“Within high-dependence categories (e.g., over 70% reliance), the US shows concentrated exposure to Chinese-made final consumer goods, particularly communication equipment (e.g., telephones, representing 9% of total U.S. imports from China) and toys (2.5%). Meanwhile, only 10% of China’s imports from the U.S. exceed the 70% reliance threshold, nearly all of which are transportation-related—primarily aircraft and spacecraft,” the note said.
