Trade Wars Take a Toll on Tech Giants
Recession fears and global economic uncertainty have led Amazon and Apple to issue cautionary earnings forecasts, highlighting the vulnerability of even the world’s most valuable companies to US President Donald Trump’s trade wars. Amazon’s profit is expected to fall billions below Wall Street’s expectations, citing “inherently unpredictable” future results due to tariffs and trade policies. Chief Executive Officer Andy Jassy noted the uncertainty surrounding tariffs, stating, “None of us knows exactly where tariffs will settle or when.”
Apple warned investors that tariffs would increase its costs by $900 million this quarter, with sales in China missing expectations. In contrast, companies selling digital goods like Microsoft, Meta, and Alphabet reported business as usual, as import taxes don’t apply to software and cloud computing services in the same way they do to physical products. Amazon shares dropped 1% in New York, while Apple’s stock plummeted 5%. JPMorgan Chase analyst Samik Chatterjee gave Apple “full marks for transparency and resilience” but lowered earnings estimates due to macro headwinds and tariffs.
While companies selling digital goods may be currently insulated, they are not entirely immune to the effects of trade wars. Meta increased its spending on data center infrastructure due to higher hardware costs, and Microsoft raised Xbox console prices citing higher development costs. As economic conditions deteriorate, business-oriented vendors may eventually feel the impact, potentially affecting their customers’ ability to purchase digital goods and services.
As Microsoft noted in a regulatory filing, changes in global trade policies “could result in increased supply chain challenges, cost volatility, and consumer and economic uncertainty,” potentially affecting their results of operations. The trade wars’ far-reaching consequences may ultimately trickle down to affect even companies that primarily sell digital goods, as economic uncertainty causes clients to pause buying and reduces consumer spending power.
