President Donald Trump isn’t backing down on his protectionist trade rhetoric, and the potential for an all-out trade war with China has Apple Inc. (Nasdaq: AAPL) investors on edge. While a trade war is certainly not good news for Apple, the threat of Chinese retaliation may not be as bad as investors think.
Just days after implementing tariffs on imported steel and aluminum, Trump once again spoke out on trade policy on Twitter on Wednesday.
“We cannot keep a blind eye to the rampant unfair trade practices against our Country!” Trump wrote.
[See: 6 Reasons to Love Apple Stock.]
On Tuesday, Reuters reported that a source who has discussed the matter with the White House said Trump is considering additional tariffs on $60 billion of Chinese imports.
China has said it does not want a trade war with the U.S., but it is prepared to take “necessary measures” if tariffs negatively impact its economy.
Goldman Sachs recently listed Apple as among 20 U.S. companies with the most exposure to China. Apple generates about 22 percent of its revenue from China.
Still, there are several reasons why China may not choose to target Apple with its retaliation. First, if China wants to retaliate against Trump personally, it would be more likely to single out resources or businesses based in red or swing states that could potentially hurt Trump and Republicans in upcoming elections.
In addition, GBH Insights head of technology research Daniel Ives says it may be difficult for China to go after Apple without creating some self-inflicted wounds.
“Given the tightly woven integration between Apple and Foxconn in China, we believe there is minimal risk to this relationship, cost increases, and backlash to Apple selling its iPhone devices within China (domestic competition remains a lingering worry), which is a key market opportunity for Apple over the coming years,” Ives says.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
Finally, Ives says Apple, Facebook ( FB), Amazon.com ( AMZN), Netflix ( NFLX) and Alphabet ( GOOG, GOOGL) are all primarily service-based companies, and most of their platforms are already blocked by the Chinese government.
The prospect of a trade war may weigh on Apple’s market sentiment for now, but Ives says it’s mostly just “a scary headline that ultimately will have minimal financial impact to Apple, FANG, and other tech names.”
GBH Insights has a “highly attractive” rating and $205 price target for AAPL stock.
More from U.S. News
The 10 Best Ways to Buy Tech Stocks
9 Growth Funds That Will Turbocharge Your Portfolio
7 ETFs You Have No Business Buying
Apple Inc. (AAPL) Stock Has Limited Risk in a Trade War originally appeared on usnews.com
