US-China Trade War Takes A Big Bite Off Apple’s Sales

In news that sent equities markets worldwide on a downward spiral, Apple disclosed that its iPhone sales in China declined significantly due to the ongoing US-China trade war. The company warned investors that target revenues will not be met. 

Apple Chief executive Tim Cook said its fiscal first-quarter revenue would be $84 billion, down from the $89 to $93 billion it previously forecasted.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Mr. Cook wrote in a letter published after markets closed on Wednesday.

He added: “China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States.”

Cook also cited that poor demand for the latest iPhone models contributed to the drop in sales.  He attributed this partly to “some customers taking advantage of significantly reduced pricing for iPhone battery replacements”.

After the surprise announcement, shares in the technology giant fell seven per cent in after-hours trading.  The shares had already fallen 32 per cent from their peak in early October, when investors still had high hopes for the new iPhone models.

Chairman of the White House Council of Economic Advisers, Kevin Hassett, told reporters on Thursday that Apple could be the first of many companies adversely affected by China’s economic slowdown.

“Make no mistake: Chinese economy is on a path we’ve not seen in decades. That’s something that will affect companies operating in China. But, upside is we estimated China was stealing $500 billion a year in intellectual property. We’ve got them to the table now,” said Hassett.

“There’s a lot of room for positive gains … and the fact their economy is having trouble right now is a sign that our policies have been effective in getting them to the table,” Hassett added.

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