Apple's latest earnings warning, which sent shivers down Wall Street and eroded billions in market capitalization, showed that US companies are vulnerable to suffering if Washington does not take sincere steps to stop the trade war.
The US smartphone giant saw its shares plummet nearly 10 percent in Thursday's trading session after lowering quarterly sales forecast, suffering its biggest loss in six years.
Meanwhile, an US official predicted that more American companies in China are likely to follow suit and see trouble in the Chinese market.
Kevin Hassett, chairman of the White House Council of Economic Advisers, told CNN on Thursday that "there are a heck of a lot of US companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded ... until we get a deal with China." "It's not going to be just Apple," the US official was quoted as saying in the media report.
The California-based company said it anticipated some challenges in emerging markets, particularly in the Chinese market, where over 100 percent of its year-on-year worldwide revenue decline occurred across iPhone, Mac and iPad sales, according to a letter CEO Tim Cook issued to Apple investors on Wednesday.
Cook blamed China's economic slowdown for Apple's less-than-expected performance, and the trade war between the two countries has added to the pressure.
Apple faces a slowdown in the Chinese market, as its product quality could not meet its premium price, Benjamin Cavender, a Shanghai-based analyst at China Market Research Group, told the Global Times on Friday.
Cavender noted that the trade war may partly weigh on some foreign brands, along with the slowing economy and more competitive homegrown Chinese brands as major factors.
US coffee brand Starbucks has been facing a growing challenge in China since last year amid a rise in competition from local brands and a shift in consumer sentiment amid ongoing China-US trade tensions.
Losing territory
The Apple CEO partially blamed the trade war for disappointing sales in China. The US gaint has been facing more challenges in the Chinese market, underscoring the strong connection between US and Chinese economies and reaffirming that there is no winner in a trade war, analysts said.
"Its supply chain in China is crucial for the US tech giant, and increased tariffs also drive up its costs," Song Guoyou, director of Fudan University's Center for Economic Diplomacy, told the Global Times.
Semiconductors and communications products have already been affected by previous rounds of increased tariffs, and US blocking Chinese tech firms will eventually hurt itself, he noted.
However, the two countries are now moving forward to tackle differences on trade issues. The two sides will hold vice ministerial-level talks on trade on Monday and Tuesday.
Jeffrey Gerrish, deputy US Trade Representative will lead the US delegation to visit Beijing and work with his Chinese counterparts, aiming to implement the agreement reached by their top leaders at G20, the Chinese Ministry of Commerce said on Friday morning.
Besides geopolitical pressure, US companies have to acknowledge that they are facing more competition from Chinese rivals, especially when companies such as Huawei Technologies and Oppo Electronics Corp have been investing significantly in research and development.
"Apple's products are more expensive [compared to domestic brands], and lack innovation, particularly in appearance," James Yan, research director of market consultancy Counterpoint Research, told the Global Times on Friday.
While Apple saw sluggish growth in China, Huawei led the China smartphone market with 13.4 percent year-on-year growth in the third quarter of 2018. Xiaomi also recorded a growth of nearly 20 percent, according to a report released by the International Data Corp on December 20.(By Chen Qingqing, Source: Global Times)
