Washington Insider: Apple’s Woes Boost Pressure for Trade Deal

Last week, a market warning came from Apple blaming “trade tensions with China for a predicted drop in revenue.” The Hill is reporting that this is putting “new pressure on the Trump administration to end its tariff fight with Beijing.” Apple CEO Tim Cook wrote to investors that the company was cutting its revenue expectations due to an economic downturn in China that has reduced the demand for iPhone upgrades. The warning from one of the most reliable American companies for investors brought new anxiety to the markets, The Hill said. Tech companies have long highlighted their concerns with the administration’s trade policies. But the rare revenue warning from Apple is putting a new spotlight on the current talks between the US and China. China’s Ministry of Commerce announced last week that a delegation led by U.S. Deputy Trade Representative Jeffrey Gerrish would be holding talks with their officials. David Dollar, a senior fellow with the Brookings Institution’s China Center, says that as more companies feel the effect of the trade war, the pressure on the administration to secure a trade deal will only increase. The talks moved into a third day. “The company results are important because it would be harder to stick with a hard-line position if more U.S. companies are hurt,” Dollar told The Hill. The White House, though, is downplaying the industry’s woes. Trump officials see the economic downturn in China as evidence that the tariffs imposed on goods manufactured in that country have been effective in strengthening the U.S. hand and pushing Beijing toward a more favorable trade deal. Kevin Hassett, the chairman of the White House Council of Economic Advisers, said last week that more U.S. companies in addition to Apple will see their revenues drop as a result of sanctions. He said that trend “puts a lot of pressure on China to make a deal.” “If we have a successful negotiation with China, then Apple’s sales and everybody else’s sales will recover,” Hassett said in an interview with CNN. “But right now, China is feeling the blow really of our tariffs and I think that that’s an appropriate place for us to have taken the relationship given the amount of stuff that they were stealing from us.” Commerce Secretary Wilbur Ross even denied on Monday that there was any link between Apple’s new revenue predictions and the trade fight with China. President Trump also has dismissed Apple’s complaints about high tariffs, telling the company to move production to the U.S. to avoid those costs. The trade talks pose a complicated test for negotiations, with a number of contentious outstanding issues. During trade talks this week, U.S. negotiators were expected to push hard to hold Beijing to its recent pledges to buy more U.S. goods, open up access to its market for American companies and give more protection to foreign intellectual property, the Wall Street Journal said. However, many in the tech sector don’t see China’s economic woes as a win when they are so reliant on manufacturing and consumers in that country. These groups are urging the administration to resolve the trade fight. Naomi Wilson, senior director of policy at the Information Technology Industry Council, urged an agreement that “addresses China’s unfair trade policies, rolls back tariffs, and ends this mutually damaging trade war.” Experts also say it remains to be seen which side has the upper hand in negotiations as a result of China’s economic troubles and the impact on US tech companies. “I think that’s the $64 million question,” Charles Gabriel, president of the policy research firm Capital-Alpha, said. “Who didn’t know you couldn’t beat up China and force companies, even countries, to move supply chains without the engine for incremental global growth (China) slowing down? And for that slow down to threaten stock markets everywhere?” The two sides reached a deal for a truce on tariffs last month in order to give themselves time to work toward a deal. The agreement set a deadline of March 1. It’s unlikely that any significant progress will be made in these initial talks, The Hill says, but the struggling U.S. markets appear eager for some good news. The President touted the markets’ rise in his first year in office but faced a volatile Wall Street in 2018, which was the worst year for stocks in 10 years. “Should no agreement be reached in the near-term, the stakes and harm to American companies and workers will continue to increase,” Wilson, from the Information Technology Industry Council, told The Hill. “The uncertainty of US-China trade relations will also destabilize the economy and have a global impact.” So, we will see. The Apple letter seems to have gotten considerable attention but it will be important for producers to watch to see whether such “damage reports” actually affect the ongoing negotiations, Washington Insider believes.