The consequences of the commercial war

Tim Cook Photographer: David Paul Morris/Bloomberg

For US President Donald Trump, the long-term benefit of a trade war with China justifies the pain in the short term. Both for consumers and investors. It should be noted that it would now be more difficult to defend that case. Due to the collateral damage, it is causing, which now includes one of the most recognized brands in the United States, Apple Inc.

And Apple Inc. on Wednesday lowered its outlook for first-quarter revenue. This after a slowdown in demand from China larger than expected and less updates to the models of the iPhone.

It should be noted that it was something unexpected for Apple. In fact, through a letter to investors, Executive Director Tim Cook assured that the company did not expect growth in emerging markets to slow down so much, especially in China.

While on the other hand, US officials will go to Beijing next week for business talks.

The damage is already done

The economic war between the United States and China has undoubtedly caused damage. The only thing left to those affected is to act to remedy the situation. Do not leave aside an important fact. And it is that Apple shares fell in the extended operations, dragging futures on the broader S & P 500 index.

Better evidence of the effects that war has caused, there is not. Likewise, tensions between the two largest economies in the world are becoming counterproductive in the United States. While Chinese growth is slowing down more quickly than many observers expected.

Also, according to Leland Miller, who is CEO of China Beige Book, a data analysis firm, “China’s economy is experiencing a much sharper slowdown than public data reports, suggesting that there is much more pressure about Beijing to reach a commercial truce of what is popularly understood”, he also added. “On the other hand, the fall of the US stock market seems to be playing a similar role for President Trump”.

In addition to this, according to this week’s data, there has been a noticeable worsening of the outlook for China’s manufacturing sector. The IHS Markit indicator signaled a contraction for the first time since mid-2017, confirming a trend in the official index on Monday that showed the weakest reading since the beginning of 2016.

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Source: Andrew Mayeda and Jenny Leonard | Bloomberg