- Kevin Hassett, the chair of the White House Council of Economic Advisers, suggested Thursday that Apple’s surprising sales warning could just be the start for US companies.
- Hassett said “a heck of a lot of US companies” would have lower earnings because of President Donald Trump’s trade war with China because of the country’s economic slowdown.
- But Hassett argued that the Chinese slowdown actually put more pressure on China to make a deal with Trump.
- Stocks were sharply lower following Apple’s announcement, with the tech giant down almost 9%.
One of President Donald Trump’s top economic advisers suggested Thursday that Apple’s shock announcement downgrading its revenue outlook for the holiday quarter was only the first in a series of ugly corporate revelations coming as a result of the US-China trade war.
Kevin Hassett, the chair of the White House Council of Economic Advisers, told CNN that Apple’s sales drop in China – which the company pointed to as the primary reason for the revenue shortfall – would only represent the start for US companies.
“It’s not going to be just Apple,” Hassett said. “There are a heck of a lot of US companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.”
Apple said Trump’s tariffs on Chinese products were contributing to an economic slowdown in the country. In turn, Chinese consumers are not buying Apple products, Apple CEO Tim Cook said in an interview with CNBC on Wednesday.
“And what I believe to be the case is the trade tensions between the United States and China put additional pressure on their economy,” Cook said.
In Hassett’s reading, other US firms with significant sales to China will also be harmed by the slowdown, leading to a slew of ugly earnings surprises.
Despite the ostensible bad news for American companies, Hassett said the pain actually gave Trump a better negotiating position in trade talks with Beijing.
“That puts a lot of pressure on China to make a deal,” he said.
The US and China are negotiating a deal during a 90-day truce that expires on March 1. Before the truce, the US placed tariffs on $US250 billion worth of Chinese goods and Beijing responded with tariffs on $US110 billion worth of US goods. While Apple has been spared from the direct cost of tariffs, the indirect impact of the trade war has clearly taken its toll on the company.
Beyond the earnings worries, Hassett also downplayed the market’s reaction to the Apple news – and the potential for more announcements of a similar nature – as a short-term concern. He argued that strong US economic fundamentals would win out in the long run.
“So when we settle the trade issues with China, then people will go back to focusing on the long-run growth that absolutely is going to return to probably a higher level once we fix this problem with China,” Hassett said.
But for now, US markets were sharply lower Thursday morning, with the Dow Jones Industrial Average off nearly 540 points, or 2.3%, the S&P 500 down 43 points, or 1.7%, and the tech-heavy Nasdaq down 125 points, or 1.9%, as of 11:15 a.m. ET.
As for Apple, its stock tanked after the announcement and was down nearly $US14 a share, or 8.9%, on Thursday.
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