S&P 500 flirts with fresh record high, but chip-led softness weighs
Investing.com -- Apple shares (NASDAQ:AAPL) dropped 6.4% in pre-market trading on Thursday, leading the decline among the Magnificent Seven stocks, following President Donald Trump’s implementation of the largest U.S. tariffs in a century.
Apple is a company with significant exposure to tariff risk due to its key manufacturing hub in China. However, it remains unclear whether Apple will be exempted as it was the case in 2018.
"...Note that on Feb 25, AAPL’s CEO announced it would invest US$500bn in the US over the next four years, including setting up server production in Texas, supporting TSMC’s chip plant in Arizona and creating 20K jobs," Jefferies analyst Edison Lee said in a note.
It is estimated that roughly 15% of iPhones are assembled in India, 85% assembled in China, and about 33% of global iPhone sales are to the U.S., Lee said.
Other companies in the Magnificent Seven index also experienced declines, including Amazon (NASDAQ:AMZN), which fell by 4.8%, Nvidia (NASDAQ:NVDA) by 3%, Tesla (NASDAQ:TSLA) by 3.2%, Meta (NASDAQ:META) by 2.7%, Alphabet (NASDAQ:GOOGL) by 2.1%, and Microsoft (NASDAQ:MSFT) by 1.6%.
Trump announced the introduction of a "baseline" tariff of 10% on imports from all other nations starting on 5 April, with higher "reciprocal" rates on specified trading partners from 9 April.
The new tariffs included a 34% rate on China (54% including already announced tariffs), 24% on Japan, 20% on the European Union, and 31% on Switzerland.
USMCA-compliant goods from Canada and Mexico have been exempt for now. In addition to these, the President reiterated a previously announced 25% tariffs on auto imports and parts.
The Trump administration’s actions have already increased the U.S. effective tariff rate from 2.5% to approximately 9.0%, the highest since World War II.
"The situation remains fluid. If the threatened sector-specific tariffs are also eventually applied, our initial estimates suggest that the effective tariff rate could rise as much as 15 percentage points to a level between 20% and 25%," UBS economists said in a note.
This year, the Bloomberg Magnificent 7 index, an equal-weighted gauge of the stocks, has fallen 14% after a 67% increase in 2024.