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The shares of technology companies have been hit hard by China's retaliation against the United States in the latest record of the ongoing trade war between the two countries.
The S & P 500 index sold nearly $ 1.1 trillion, while the Dow Jones Industrial Average and the Nasdaq Composite Index fell 2.38% and 3.41%. %, respectively.
On Monday, China reacted equally to the 25% increase in tariffs on imports into the United States by imposing duties of 25% on some $ 60 billion of US exports to the United States. country.
On June 1, Beijing will impose tariffs of 25% on more than 5,000 products. Several other exports to the country will see their rights go up to 20%. This has increased by 10% and 5%, previously. The political base of President Donald Trump's political support – Midwest animal products, fruits and vegetables – seems to have the highest tariffs.
But technology companies are particularly exposed in the trade war. Indeed, the news sent spiraling tech stocks in what Alexia Bonatsos, a former co-editor of TechCrunch, called the "Red Tech Wedding".
Rising tariffs will make the manufacturing of technology products from Apple and other US companies more expensive, which will likely incite hardware manufacturers to raise prices at home, while the rights to finished products arriving in China could make them excessively expensive for local buyers. country.
More expensive consumer products also mean less money to spend on non – essential items, which could mean more frugal behavior on the part of consumers and less spending in the on – demand economy. It could also lead to a decline in advertising as companies reduce their spending and reduce their spending in areas considered non-essential.
All of this could expose technology stocks – beyond the algorithms, it would simply be selling assets and taking profits in what could be a prolonged slowdown in the market.
The trade war, which has already had a negative impact on initial public offering, further upset the stock market (short-term) performance of the company today.
Uber was far from the only technological title to see the red. Amazon Stocks down 3.56%, Alphabet down 2.66% and Apple down 5.81%. Meanwhile, Facebook shares fell by 3.61%; Netflix has dropped more than 4% on the day.
Some tech companies might again be expected, but it is unlikely they will receive the kind of bailouts or subsidies that the president is offering to US farmers affected by the economic battle with China. Unless Congress is able to block negotiations around a set of infrastructures (which seems less and less likely as the 2020 elections cast shadow over the government), there is little hope of getting government help to mitigate the shock.
"In our view, it could get worse for at least a few weeks or even months, and it's really about bringing the two back to the bargaining table and ending the deal, it will probably take more pain in the markets …" Really the only one The question is whether we need a market correction of 5%, 10% or more, "told CNBC's Ethan Harris, head of the global economy at Bank of America Merrill Lynch.
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