Last week, the Trump Administration raised its tariffs against China to 125%. On Friday, Beijing responded to the U.S. tariff hikes. It increased its tariffs on U.S. imports to 125%. What it means has more to do with what it symbolizes than the dollar amount.
On Saturday, Trump backtracked on the tariffs. The U.S. Customs and Border Protection said that smartphones, computers, and various electronics will be exempted from the U.S. tariffs. Investors who bought up semiconductor stocks and Apple (AAPL) should enjoy a strong profit today. Watch Apple (AAPL), Micron (MU), Advanced Micro Devices (AMD), and Marvell (MRVL).
Prices for Apple iPhones would have risen to at least $2,000 if the company had to build the device in the U.S. The U.S. manufacturing infrastructure cannot match the low wages and capital costs in China, India, and Vietnam.
Tariff Exemptions
The White House likely recognized the sell-off in the $29 trillion Treasury market last week. Yields rose, causing mortgage rates to rise above 7%. Tariffs indirectly caused a sharp increase in costs for servicing home lending.
Expect the government to realize the negative impact of tariffs. The tariff exemptions on electronics followed after China already exempted tariffs on semiconductors. For example, the media reported that U.S. chip companies that outsourced their manufacturing would be exempted from China’s import tariffs. This benefited Qualcomm (QCOM), AMD, Taiwan Semiconductor (TSM)), and Texas Instruments (TXN).
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