President Trump orders U.S. companies to look for alternative to China, Apple and chip stocks slide

Apple CEO Tim Cook laughs with U.S. President Donald Trump as the news media leave the room after the two men spoke while participating in an American Workforce Policy Advisory Board meeting in the White House State Dining Room in Washington, U.S., March 6, 2019. (photo: Reuters/Leah Millis)
Apple CEO Tim Cook laughs with U.S. President Donald Trump as the news media leave the room after the two men spoke while participating in an American Workforce Policy Advisory Board meeting in the White House State Dining Room in Washington, U.S., March 6, 2019. (photo: Reuters/Leah Millis)

Shares of Apple and semiconductor stocks slid on Friday after President Donald Trump said U.S. companies should “immediately start looking for an alternative” to their operations in China.

Annie Palmer for CNBC:

Shares of Apple ended the day down 4.6%, while the VanEck Vectors Semiconductor ETF declined 4.1%. Among the chip companies, Qualcomm slid 4.7%, Nvidia lost 5.2%, Advanced Micro Devices dropped 7.4%, Micron fell roughly 4% and Broadcom slid 5.3%.

The tech-heavy Nasdaq was off 2.6%, while the Dow Jones Industrial Average slid 2.3% and the S&P 500 fell 2.5%.

Trump’s comments on Friday mark the latest fallout in the trade war between the U.S. and China.

Trump’s tweet came after China on Friday pledged to levy tariffs on $75 billion more of U.S. goods, including autos.

MacDailyNews Note: Late last night, President Trump referenced the International Emergency Economic Powers Act (IEEPA) in a followup tweet:

Thoughtful commentary on this issue is welcomed below. Please keep the discussion civil and on-topic. Off-topic posts and ad hominem attacks will be deleted and those who post such comments will be moderated/blocked. Permanent loss of screen name could also result.

49 Comments

  1. Well, the gauntlet has been thrown down… maybe. We’ll see if this sticks.

    But it isn’t like Trump hasn’t been telegraphing this since before he got elected. Companies including Apple should have long ago been preparing for this day. Frankly it was idiotic to put all their eggs into the basket of one country—China. Apple could just as easily have been f’d by China given they are an authoritarian communist regime.

    Long before Trump came along they should have been looking for ways to diversify their production sources.

    1. “Frankly it was idiotic to put all their eggs into the basket of one country—China.”
      Frankly, there were NO other baskets. Old timers like you think Apple is Ford where they build their own plants and have manufacturing employees on staff. Apple is happy to pay ANYONE a fair amount to build their products for them. It just so happens that China has focused for YEARS on being THE number one place to build things, and it is.

      And when Apple and other companies move manufacturing out of China, guess who’s going to still do the manufacturing? A CHINESE COMPANY. With dollars still going back to China. So much for diversification. 🙂

      1. “And when Apple and other companies move manufacturing out of China, guess who’s going to still do the manufacturing? A CHINESE COMPANY. With dollars still going back to China. So much for diversification.”

        So? Many Illegals working in the U.S. every Friday I’ve seen long lines at Western Union sending money back to their home country.

        It’s called national security for Chinese to build in the U.S. abiding by our laws and not controlled by a communist dictatorship. They are FREE.

        You post as usual is very vague, mocking and lacks details. You neglected to mention they would have to build a plant employing American workers. They would hire American workers and in both cases pay local, state and U.S. taxes.

        What is your evidence they would send the remainder of funds to China? And if so it their right, so what.

        I think they are smart enough to invest in the U.S. best investment on planet Earth. Are they going to invest in Iran, Syria, Iraq et al. I think not…

        1. What’s your evidence that the folks at Western Union aren’t here legally? I’m guessing it’s the same as the evidence that Greenlanders don’t have a right of self-determination, that certain native-born US citizens should go back where their ancestors came from, and that American Jews are agents for Israel.

          They aren’t white Christians from Northern Europe.

        2. “What’s your evidence that the folks at Western Union aren’t here legally?“

          My cousin who works there. The migrants like government ID. That said, over 50 % are legal…

          1. The fact that someone does not present a government ID in a context where such an ID is not required hardly seems conclusive that they are in the country illegally. How many US tourists in Europe could present an ID issued by the local government? On any given day in any American border city, a sizable number of people in any given shop are Mexican citizens shopping legally (and the same is true for Americans in the shops across the border). At least 40% of the legal residents in El Paso and Juarez have relatives on the other side.

            My problem with the statement was that it sounded like somebody was guessing the nationality of people standing in line based on their appearance. There is entirely too much of that going on, as in the call to three native-born American members of Congress to “go back” to a country where they have never lived. The obvious implication was that since they didn’t “look American,” they were less loyal to this country than people who look like Donald Trump. That dovetails nicely (ugh) with the assumption that American Jews owe loyalty to the Government of the State of Israel, and the assumption that white Danes and Americans can determine Greenland’s future without consulting the nonwhites who actually live there.

            While I was typing this, I was listening to the story of a US citizen who spent four days in a Louisiana jail AFTER he presented a valid local drivers license, US passport, and Social Security card because he looked illegal. This is a problem, as I am sure you agree.

  2. “Long before Trump came along they should have been looking for ways to diversify their production sources.”

    Yes indeed, Tim’s only concern is profits, not national security diversification. All eggs in one basket is playing with fire and sheer stupidity not to have backup plans. Fat and lazy billionaire company, they brought it on themselves…

    1. That’s exactly correct. Timmy has been moving Apple manufacturing to China since the day he arrived. Nothing Apple manufacturers is made in the USA, and those jobs “ aren’t coming back”, admitted your favorite CEO.

      So why do you come here to support the biggest corporate traitor to the USA?

  3. Apple stock fell as though it were a pure chip-making company, despite the fact Apple doesn’t carry a higher P/E as most chip-making companies do. I’m not sure how Apple is being valued but it doesn’t seem quite right to me. It must have to do with Apple’s high dependence on China. It seems as though Tim Cook or whomever makes these decisions have made a costly mistake. I suppose no one is privy to the future, so maybe it couldn’t be helped. I just felt Apple had the cash reserve to diversify but I suppose chasing after as much profits as possible is Apple’s way. However, Apple could have its products made and assembled in other parts of the world other than China. I can’t see having its products made in the U.S. as it would raise the cost of their products through the roof. Maybe robotic factories using advanced AI is the only answer.

    I have completely given up on Apple becoming the world’s most valuable company by market cap. There are probably too many holes in the way the company is being run for big investors to have any confidence in the company’s growth potential. All Apple’s share price is doing is roller-coasting. It spends a couple of weeks going up in value and then taking big dives back to where it was before the gains, which seems sort of ridiculous. Apple also no longer has the biggest cash pile, so the company is definitely on some sort of a decline. I really don’t know what to make of Apple, in terms of future value.

    1. “I just felt Apple had the cash reserve to diversify”
      Diversify? When the ONLY companies manufacturing at the scale to turn out 10’s of MILLIONS of iPhones PER MONTH are in China… no other company in any other country comes close… then diversifying isn’t possible. UNLESS those same Chinese companies set up shop elsewhere. The ONLY difference between manufacturing in China and outside of China is the folks doing the work. All the profits goes right back into enriching the Chinese economy. And if your end goal is enriching the Chinese economy, good job?

      Unless you’re one of those that thinks ANY OTHER COMPANY has the ability to put together the kind of massive operation China has built (there isn’t a factory in the US or anywhere in the world that matches the scale of Foxconn in China).

    2. “It must have to do with Apple’s high dependence on China.”

      Yes.

      “I just felt Apple had the cash reserve to diversify but I suppose chasing after as much profits as possible is Apple’s way.”

      Yes, and building in the U.S. will diversify, but guessing eat into profits depending upon the deal.

      If you ADD the additional Democrat Unions labor costs the price could easily be inflated to a typical average of 33%. Then the manufacturers union would step in and demand much more than a living wage with Cadillac benefits, also adding additional costs affecting the bottom line.

      I don’t know if Apple workers in the spaceship or elsewhere are union or not. If union, Cook most likely would capitulate to the unions, Democratic Party and media criticism. Certainly I hope not, standing next to the president at announcing Apple World Diversification.

      That would be SWEET…

      1. A couple of points for consideration, first, your first referencing apple cash reserves and the ability to diversify

        Good point, just one more reason for apple management and their big bank advisors to cast aside their ill considered goal of going cash neutral. Having a large cash reserve is key to economic survival, ( just ask Steve Jobs, or at least reference his past statements on the subject) whether it be to fund diversification or to weather economic downturns.

        You never know when tough times are going to hit, only that they will. So imagine apple w/o the cash cushion, and regularly borrowing from large financial institutions to finance their operations – which many large corporations do – then imagine – or at least remember -the last Great Recession of 2007 when the downturn was so deep and severe that recovery was slowed by the fact that banks basically stopped lending to preserve their own capital reserves and futures.

        What would mr. Apple have done then, w/o all that handy cash in their pocket to pay employees and fund r&d efforts? Well for one thing i bet our stock valuations would have plunged way lower than the mid $300’s that it tumbled to from its previous $700 highs.

        Point two referencing labor unions.

        Well, given that they were created and led by human beings, they are, like their creators inherently flawed institutions. On the other hand, ask your parents or grandparents about what working conditions and pay rates were like before the creation of unions and if you are willing to believe their first hand observations, i suspect you would not like going back to those days.

        Granted, they can be greedy and over reach, but one can reasonably argue that unions help create the great middle class prosperity many of us of a certain age grew up in. A level of prosperity – and a middle class – that is shrinking along with shrinking unions. So in other words the advantages of the existence of unions far outweighs their drawbacks.

        So yes, a unionized workforce making apple products in America would most certainly increase their cost and i suspect by an appreciable margin.

        But what the heck, as MDN likes to point out apple makes premium products at premium prices for sale to premium customers.

        Now that we are in the age of $1000 telephones, it might be worthwhile to remember the insight of the young Henry Ford, who chose to pay his employees far above the then going rate for labor because he understood people needed to earn enough money to be able to afford his cars and the products of other businesses that would otherwise be a stretch for working people.

  4. KING trump has spoken and all his loyal minions shall bow and fall into line. He is KING and not president. So we all must do what ever he tweets, when ever he tweets. Congress can just go home as they are no longer needed. The Supreme court is not needed, we have the KING…..

    Did I read the previous postings right??? Trump is KING. All shall follow his tweets!! ?????

  5. I’m not a lawyer, but I can read. The IEEPA says that “The authorities granted to the President … may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this title and may not be exercised for any other purpose.” Furthermore, “The President, in every possible instance, shall consult with the Congress before exercising any of the authorities granted by this title and shall consult regularly with the Congress so long as such authorities are exercised.” IMHO, this has the same look and feel of “Let’s buy Greenland.” National emergency? Trump disaster? It’s the final cry of the last person off the Titanic.

    1. By definition, an emergency is a situation that appears suddenly and requires an immediate response without the delay that asking Congress to pass a law or vote an appropriation would require. To be an emergency, the situation must be not only unforeseen but unforeseeable through ordinary diligence. Otherwise, the Chief Executive could simply wait until a developing situation became critical in order deliberately to bypass the routine constitutional process.

      Mr. Trump was talking about China, and all the same issues he has mentioned recently, as soon as he announced his candidacy. He has had four years to propose legislation or pursue rulemaking under existing law. He has not done so. Having failed to follow the ordinary constitutional process, he cannot circumvent it by claiming that this long-standing problem is suddenly an emergency. Something that he has been discussing for years can hardly be “unusual and extraordinary.”

      Prior Administrations were aware of all these problems and sought to address them by forming a Pacific trade bloc that could use its combined strength to put China in its place. The idea was to isolate China and outcompete it. As almost its first official action, this Administration terminated those efforts, reasoning that it was better to isolate America than China. The predictable resulting chaos is simply not an unforeseeable emergency by any standard.

  6. Simple fact – he is senile and rapidly going downhill. Just goddam gibbering nonsense… constantly lies… contradicts himself all the time. BUT – he could do nothing without Moscow Mitch and the rest of the hypocritical scumbag “destroy American democracy and leadership” crew.

  7. Crikey O’Riley…he’s flipped, gone total tinpot Mussolini !!!
    Soon to be followed by full media suppression, banning Democrats as an illegal organisation, suspension of elections. He’s definitely winning…bigly…I just don’t know what exactly.

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