Trump tariffs hit big tech as stocks tumble for third session
The US tech sector has been hit by newly imposed global tariffs from Donald Trump’s administration, as the president holds firm on his aggressive trade policies.
The latest rounds of tariffs, which began with an initial unilateral 10 per cent tariff on a wide array of goods, sparked severe market reactions, especially among the so-called Magnificent Seven tech giants.
The impact of these tariffs is already being felt, wiping billions of dollars off the market value of leading tech titans in just a matter of days.
Trump’s tariffs
The recently announced tariffs form part of Trump’s sweeping global trade strategy, aimed at re-balancing trade relationships with America’s largest trading partners.
These tariffs are not only targeting goods from China but have expanded to several countries, including key Asian nations like Vietnam, India, and Taiwan.
The tariff rates range widely, with some as high as 46 per cent. The most immediate effect has been on the cost of imported goods, which is expected to rise sharply, especially for industries that rely on global supply chains – and tech is one of the hardest hit sectors.
Trump has repeatedly defended the tariffs, even as the stock market reacts negatively, particularly within the technology sector.
During his April 6 remarks aboard Air Force One, Trump indicated that the tariffs were necessary to fix longstanding trade imbalances and expressed indifference to the negative impact on the stock market.
He downplayed the sell-offs, insisting that sometimes tough measures are required to address deeper economic problems.
Tech giants in freefall
The tech sector has been hit hard by the tariffs, particularly the leading magnificent seven companies of Silicon Valley.
Chief economist at Apollo Global Management, Torsten Sløk, posted in a blog on Monday that the group was hit hard due to the fact that “roughly 50 per cent of earnings in the mag 7 come from abroad.”
“That is higher than for the S&P 500, where the share is 41 per cent,” Sløk wrote. “With trade making up a bigger share of GDP in the rest of the world than in the US, the trade war will have a disproportionately more negative impact on the rest of the world.”
In a span of two days, these firms collectively shed over $1.8 trillion in market value. The Nasdaq composite posted its worth weekly performance since the onset of the pandemic, and officially entered a bear market.
Nvidia and Tesla led the sell-off, with shares of both dropping by over six per cent. These firms have extensive supply chains in Asia, and are particularly vulnerable to the tariff hikes.
Apple, the world’s most valuable firm, saw its market value plummet as the stock dropped over six per cent as the market opened on Monday.
Apple is uniquely exposed to these tariffs because it manufactures a significant portion of its products in China, including the iPhone.
On top of that, Apple has also been diversifying its manufacturing operations to other countries like Vietnam and India, to reduce its reliance on China. These countries have also been hit by hefty tariffs of 26 per cent and 46 per cent respectively.
Meta and Amazon saw declines of over three per cent, while Microsoft and Alphabet fell over one per cent.
Analysts have suggested that these declines are just the beginning, as investors digest the full impact of Trump’s trade war.
The Mag 7 struggle with tariffs
These firms, particularly Apple, are now facing a stark reality: these tariffs are impacting their efforts to diversify their production out of China.
Apple has been relocating some of its production to countries like Vietnam and India, in anticipation of ongoing tensions with China.
However, Trump’s tariffs hit these countries just as hard as China, with Vietnam facing a 46 per cent tariff on key products such as airpods and ipads.
This has undermined Apple’s strategy to sidestep Chinese tariffs, potentially leading to substantial price increases for its products, and a hit to its famously high profit margins.
Analysts have predicted that iPhone prices could rise by up to 43 per cent, which would push the cost of an iPhone 16 pro max to nearly $2,300, up from its current price of around $1,599.
Apple may have to either absorb these additional costs, which could reduce its margins, or pass them on to consumers. Both options would hurt the company’s bottom line.
Global tech backlash
The effects of these tariffs aren’t just being felt on American soil, having created ripple effects globally.
Most notably in Europe, US tariffs hit global supply chains, causing many of its nations to reconsider their dependency on American big tech.
The European Union has already been moving toward greater tech sovereignty, and the latest actions by Trump may accelerate this shift.
In December, the European Commission signed a €10.6bn deal to create a satellite network aimed at competing with SpaceX’s Starlink.
Germany, too, finances Ukraine’s access to satellite internet as part of an effort to reduce reliance on Musk’s Starlink service.
A significant portion of European businesses are dependent on US-based cloud services, with 45 per cent of enterprises relying on tech giants like Amazon, Google and Microsoft.
In light of Trump’s tariffs, there are growing calls for Europe to invest in developing its own tech infrastructure, reducing its reliance on the US.
The end of the Trump-tech ‘bromance’
At one point, president Trump had a well-documented, if controversial, relationship with Silicon Valley’s biggest heavyweights.
Executives like Amazon’s Jeff Bezoz, Meta’s Zuckerberg and Apple’s Tim Cook all attended Trump’s inauguration, and their firms even donated millions to his inaugural fund.
Once lauded by Trump as a “patriot”, and trusted with a role in streamlining the federal government, Musk is now casting doubt on the administration’s economic direction, openly challenging the President’s flagship tariffs policy.
Trump’s promises to cut taxes and reduce regulations were seen as a boon for the tech sector, and some industry leaders even lobbied on his behalf.
Yet, those relationships have soured in the wake of the latest tariffs. Their impositions on goods produced in China, India, and Vietnam, where many tech firms manufacture their products, has caused a significant rift between Trump and the industry he once courted.