Last Friday, just before the Memorial Day long weekend, Trump threatened to impose tariffs on Apple (AAPL) and Samsung (SSNLF). He said that smartphones not built in the U.S. would face tariffs by the end of June.
Tariffs of 25% on iPhones would raise prices to levels that would likely hurt demand. To retain its strong profit margins, Apple will pass all costs to consumers. The company perfected its globalized supply chain over the last two decades to perfection. It sources such inputs as rare earths, displays, and semiconductor chips outside of the U.S. It also relies on low labor costs, something the U.S. does not have.
Apple is an American success story. Tariffs are a price shock that would hurt quarterly sales.
50% Tariffs on the European Union
The Euro Currency (FXE) strengthened toward $105 despite Trump threatening the EU with 50% tariffs on its imports. If done, the rate on its ally is higher than that imposed on China, an adversary.
Investors should infer that the U.S. is unlikely to have a trade agreement with the E.U. anytime soon. The E.U. may increase its trade with other countries, including Canada and China. Furthermore, auto firms like Mercedes-Benz (MBGAF) may increase production at their U.S. plants to avoid the tariffs. BMW (BMWKY), Volkswagen (VWAGY), and Ferrari (RACE) are also attractive holdings.
