Thanks to the U.S.-China trade war, companies like Apple are better prepared for coronavirus

According to a note from Wells Fargo analysts, despite the outbreak of the COVID-19 coronavirus, some U.S. companies find themselves better off than they otherwise might have been due to the U.S.-China trade war.

Ethan Wolff-Mann for Yahoo Finance:

U.S.- China trade war. Image: COVID-19A global outbreak of the new strain of coronavirus (COVID-19) has put a stick in the spokes of many supply chains that rely on China’s manufacturing.

However, some companies may be in a slightly better position than they otherwise might have due to the China-US trade war, a major market narrative since January 2018 when President Trump announced additional tariffs on Chinese imports.

Because of the protracted trade war, some U.S. companies sought to get shipments out of China ahead of previously scheduled tariffs, according to a note from Wells Fargo Securities… The fact that inventory-to-sales levels are especially high compared to past disruptive events seems to suggest that companies accelerated the manufacturing timeline of their goods and got them shipped out faster than usual… [so they] could have more time to source other manufacturing options if China’s manufacturing sector doesn’t recover quickly enough.

Furthermore, the trade war pushed many companies to seek to diversify their manufacturing outside of China, giving them possible venues to continue their production and limit supply chain disruption. Last June, Apple asked suppliers to look into shifting the end stages of assembly from Chinese manufacturing sites. The trade tensions were getting too hot. Some reports pegged the company to potentially move between 15% and 30% of its hardware production.

MacDailyNews Take: In other words, U.S.-China trade war forced some companies to remember the old adage “Don’t put all your eggs in one basket” which is benefits them when China production is disrupted for whatever reason.


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