That’s one Apple headwind lifted, at least for 90 days.
To the extent that Wall Street took seriously Trump’s casual threat to impose a 10% tax on iPhones imported from China, the selling pressure on Apple should lift a bit when the markets open on Monday.
Apple will be spared the specter—raised Friday by Morgan Stanley’s Katy Huberty—of three “value destructive” worst-case scenarios for Apple:
- Relocating final assembly plants out of China and replacing a million Chinese low-wage earners (“largely inconceivable”)
- Raising the price of already pricy smartphones—by $60 to $160 for the iPhone XS, for example—cutting into unit sales and revenues.
- Swallowing the tariffs, chopping anywhere from $1 to $2.50 off Apple’s 2019 EPS in Huberty’s estimate.
Apple is spared, for now. According to the White House, the trade negotiators agreed to a 90-day truce. (Ending April 1, Apple’s birthday, for those who care about such things.) Curiously, Xinhua, China’s state-run news agency, makes no mention of the 90-day deadline in its account of the truce.
My take: Has the market already discounted Trump’s negotiating bluster and priced it into the stock? We’ll find out Monday.