SAN FRANCISCO- US President Donald Trump’s limited trade deal with China removes a major hurdle for Apple and other technology stocks that have already surged this year to record highs.
The so-called Phase One deal announced, but still not signed, on Friday suspends the planned imposition of new 15 percent tariffs on Sunday that would have hit $160 billion in Chinese consumer goods just weeks before Christmas, including $115 billion worth of iPhones, laptops and other electronics.
The deal would also see the United States reduce existing tariffs on other goods. China has agreed to boost imports of US energy, pharmaceutical and agricultural products, although Chinese officials offered no details on the amount of US goods Beijing had agreed to buy.
If it is signed, Trump’s long-awaited deal will be a relief to Apple, among the US companies with the most to lose in the trade war between the world’s two largest economies, along with chipmakers who make the components in its devices, which are mostly made in China.
“The Street has been laser focused on this additional 15 percent next round of tariffs and we believe this ultimately signals a green light for tech stocks heading into year end with the impending $160 billion tariff no longer a near-term concern,” Wedbush analyst Dan Ives wrote in a note on Friday.
Ives estimated that the tariffs that would have hit iPhone imports on Sunday would have clipped about 4 percent, or 50 cents, off of Apple’s 2020 earnings per share.
Even amid trade uncertainty, Apple surged over 70 percent this year to all-time highs on broad investor confidence in recent months that Washington and Beijing would eventually strike a deal. Apple’s stock has also benefited from progress increasing its services revenue as it diversifies from declining iPhone sales.
Confidence the trade war would be settled has also pushed the S&P 500 up 26 percent in 2019 and fueled a 44 percent rally in the information technology sub-index.
Still, Investors are divided over whether Trump’s trade deal is fully priced into the market, or whether shares of Apple, its suppliers, like Qorvo and Skyworks Solutions, and other US technology and trade-sensitive stocks have room to rise.
The S&P 500 edged up 0.01 percent on Friday to close at its second record high in two days, while Apple rose 1.36 percent to an all-time high. Chip stocks including Qorvo and Advanced Micro Devices sold off from recent record highs. – Reuters