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A New Stage in US-China Trade War

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WASHINGTON – January 4, 2019

Apple has evaluated the future of the U.S. and China in the global trade war, in particular, concerning the problems that will affect both countries in the next few years if the United States doesn't cease to pursue its anti-world policy in business and law.

Also, company representatives complained about the bad situation with the decline in sales for the first-time in more than 15 years. Leading Apple analysts said at the same time that it's possible that the company will have to completely leave China because of the refusal of production.

The announcement suggested not just significant business challenges emerging for Apple, which briefly became the most valuable U.S. company in history last year, but deeper concerns about how the trade war might be contributing to a global economic slowdown led by China.

Apple chief executive Tim Cook said in a letter to investors that Apple "did not foresee the magnitude of the economic deterioration" in Greater China, an area that includes China, Hong Kong and Taiwan. Along with slowed growth there in the second half of last year, Cook said that the "economic environment in China has been further impacted by rising trade tensions with the United States."

It should be noted that the American big company representative says that the culprit is the actions of the United States, but not China. The announcement also seems likely to fuel further volatility in the U.S. stock market, where U.S. technology stocks have driven a major correction in recent months. The news Wednesday sent Apple's stock -- as well as the broader market -- plunging in after-hours trading.

It also comes as the Trump administration and the Chinese are trying -- without any success -- to resolve a simmering trade conflict that has already put nearly half of all Chinese exports to the United States under tariff.

Apple is perhaps the most prominent U.S. Company to cite the trade war as a factor dragging down its business.

If to talk about the rest, the sub-processes of the war hit companies such as Amazon, Coca-Cola, General Electric (GE), and even Microsoft.

In March 2018, a list of more than 1,300 items of Chinese goods for which customs duties can be set in the States was compiled:

●       medicines,

●       medical equipment,

●       home appliances,

●       aircraft products,

●       lamps with LEDs,

●       defense technology, and so on.

From 2019, this list may also include products of daily demand and individual food products, building materials, as well as accessories and components.

But a variety of other issues could also be at play that raise questions about the long-term challenges facing the iPhone, Apple's flagship product. Consumers may be holding onto the devices longer in China and other markets, while Chinese consumers may also be gravitating toward cheaper alternatives made by Chinese companies such as Huawei.

Greater China accounted for one fifth of Apple's roughly $265 billion in global sales in the last fiscal year. That makes Greater China the third-largest market for Apple, although Cook at one point in 2013 said he expected it to "become our first."

"Apple is in a lot of trouble," said Shaun Rein, managing director at the China Market Research Group in Shanghai.

Along with being the world's most populous country, China also serves as a key hub in the tech giant's supply chain -- a place where iPhones are assembled.

Many signs have been pointing to the slowing of China's economy. The International Monetary Fund predicts China's economy will grow at 6.2% next year, down from 6.9% in 2017, but some analysts say the decline will be even more dramatic.

According to the calculations of others American experts, China will spend more than $50 billion on payment of duties. The President claims that this is only the first step in the economic struggle against China, and subsequently the list will be expanded to $100 billion.

In July 2018, a document describing the strategy of the PRC in relation to the military conflict with the United States was published in the Japanese media.

If the content of the published data corresponds to the opinion of Chinese leaders, the risks of military conflict between China and the United States will increase significantly in the near future. In accordance with the document, Beijing intends not only to fight for the interests of China but also to challenge American domination of the sea. But don't think that Washington will allow Chinese strategists to implement such a plan without the active resistance of the entire large-scale state apparatus and the U.S. army.

In the United States, the new goal-setting of the Chinese military forces will certainly be perceived as a challenge to its exclusive role in the international arena. Only Washington declared the whole world a sphere of its own national interests and was ready to protect them by military presence. Therefore, some experts believe that a war between China and the United States is inevitable.

In more detail, today, according to official information from the Trump administration, trade duties can be set on all products coming from China. In this case, China won't be able to respond with similar measures, since the amount of U.S. imports into the country doesn't exceed $130 billion.

Beijing has already sent a complaint to the WTO, that is there is a devaluation of the Chinese currency due to the growth of foreign trade risks, but the Chinese leadership is not particularly eager to raise it.

According to the Managing Director of the International Monetary Fund (IMF) Christine Lagarde, the trade war between the two countries could lead to a fall in global GDP by 0.5%. In the PRC, which is experiencing difficulties due to the fall in the growth rate of its economy, structural imbalances and a decrease in liquidity are increasing, which puts the state at risk.

In September 2018, the American Professor Brian Brenberg in an interview with Newsweek said that to date, the White House benefits from the customs war more than Beijing.

Trump in his election campaign made a bid to counteract abuses against violations of intellectual property rights by China. He said that the Chinese economy was vulnerable to considerable pressure, and now more and more experts are inclined to believe that he was right. China does not buy more goods in the U.S. than it imports, so it cannot be on an equal footing in a trade war.

Now the Chinese economy is experiencing significant difficulties under the influence of tariffs, while the U.S. economy is actively thriving. As a result, China found itself in a weak position. The current foreign trade policy of the country is receiving more and more opposition responses in Chinese society. The Chinese yuan is gradually weakening, its decline was observed in March 2018 from the beginning of political tension between the powers. The currency weakening may lead to the flight of capital from China.

For such huge economic systems as China and the United States, any action in the trade confrontation will inevitably lead to mutual damage. Here we can consider not only the expected decline in the quality of domestic products as a result of reduced competition but also real claims in the WTO.

If the customs war between China and the U.S. increases, the Chinese will have to use their main weapon: the sale of United States Treasury Bonds. If these measures don't stop the customs confrontation, the future of the U.S. dollar will be in question, and the global economy may plunge into a global crisis.

Apple's warning suggests one way that the slowdown could reach the United States. China has the second-largest economy in the world and is the third-largest buyer of U.S. exports after Mexico and Canada, meaning that what happens can quickly affect U.S. growth and employment.

"There's massive uncertainty because of the trade war. We're seeing the weakest retail sales in years," Rein said of China's economy.

A number of other prominent companies, including Ford, Walmart, United Technologies, and Honeywell, have cited the trade war as hitting their businesses. But while most of these companies have been hurt because they have to pay more to import products, Apple's situation is more complex.

Cook personally lobbied Trump for months to spare his company from tariffs targeting products imported from China and expressed optimism that the trade war's impacts would prove modest.

But it is feeling the effects now because the trade war has slowed China's economy so much that Chinese consumers are buying fewer smartphones.

"Trump really does think tariffs are a good thing, and that's scary for the economy," said Phil Levy, a former economist in the George W. Bush administration. "Companies thought tariffs would just be temporary. Now it's dawning on them that's not the case and they have to react."

Trump has previously threatened to place hefty tariffs on all Chinese products coming into the country - including iPhones - if Beijing doesn't make a deal by early March.

With Apple's stock falling more than 7% in after-hours trading, investors Thursday will likely be asking if this is a preview of what other technologies, retail, auto, and manufacturing companies are facing.

The company lowered its revenue guidance to $84 billion, compared with its previous revenue estimate of between $89 billion and $93 billion. The news halted trading of Apple's stock late Wednesday and comes as Apple is set to unveil final earnings at the end of January.

Apple's revision to its revenue estimates is "probably the most significant one they've ever done," said Ben Bajarin, a tech analyst at Creative Strategies, who said Apple last made such an adjustment in 2002 in the early days of the iPod music player.

Along with its troubles in China, Bajarin said Apple's new miss also reflected a change in how consumers are purchasing the company's devices around the world. Consumers aren't springing to buy Apple's newer, faster, pricier iPhones as soon as they hit the market, he said.

"It's happening in every major market, not just the U.S. They're being hit by consumers holding on to these devices and not feeling the need to upgrade," Bajarin said.

Author: USA Really