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Tech Sector In Trade War Turmoil

Australian technology stocks are expected to follow their US counterparts downwards when the ASX opens this morning following China’s decision to impose US$75 billion in new tariffs on US goods.

US President Donald Trump responded by ordering all American companies to leave China and imposed a further $5 billion worth of tariffs on the Middle Kingdom, before heading for the G7 meeting in France.

Central to the technology sector are Beijing’s new tariffs on electronics components that include smartphones, an apparent slap in the face for Apple ahead of the launch of its new model iPhones, much of which are assemble in China and use Chinese made components.

Along with consumer technology the semiconductor sector is also feeling the pinch. The escalation appears to be Xi Jinping telling Trump who is in charge of the holiday season in the US, normally a period of increased sales for consumer electronics including phones and toys.

The tit-for-tat tariffs sent Wall Street in a spin with the Nasdaq falling 2.6 percent and the S&P 500 down 2.5 percent. Apple plunged 4.6 percent on Friday while semiconductor stocks also took a battering. Van Eck Vectors was down 4.1 percent, Qualcomm lost 4.7 percent, Nvidia slipped 5.1 percent, AMD 7.4 percent and Broadcom 5.3 percent.

Trump headed to the G7 in France with the same message he brought to the last one in Canada, where he stormed out. A coordinated message from G7 can help to calm international markets but analysts say that won’t be the case.

Trump plans to tout the administration’s policies of tax cuts and deregulation as the panacea to other countries’ policy ills. He will also tell the G7 he will not back down in the China/US trade dispute.

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