Critical supply chains in trade war cross-hairs.

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Tit-for-tat tariffs creating mischief in big tech supply chains.

As I write this around midnight, the escalating US-Sino trade war can be seen in tonight’s share price declines across big tech.

Apple, which sources most of its phone/pad component inputs from China is down over 3.4% as retaliatory tariffs are starting to get baked in (i.e., cost is going up so either customers will be asked to pay more or profits will suffer).

Intel and Qualcomm are down 2.4% and 5.2% respectively because they are no longer allowed to supply Huawei (revenues will take a hit).

Google’s down 2% after it suspended dealings with Huawei.

Huawei is seen by the White House as a national security threat. The US recently instituted a trade ban on the company, so Huawei now needs a license to operate in the US.

China just drew a rare gun.

In yet another retaliation, China is threatening to restrict rare earth exports to the west.

Rare earth (RE) alloys are critical inputs for a wide range of technology related devices and batteries, in addition to permanent magnets for electric motors.

Other than for a few exceptions (ASX listed Lynas is the best example), China controls the global rare earth supply chain. This is why northern hemisphere magnet manufacturers in particular have been scrambling to create ‘out of China’ supply chains for some years now.

Lynas’ recent announcement concerning its intention to build (in joint venture) a RE separation/processing plant in the US, is likely to be hailed as a victory for various downstream markets (users of RE alloys) in the US.

Both Presidents are invested in an escalating conflict.

The shift to targeting specific companies and supply chains, in addition to tit-for-tat tariff bludgeoning represents a new level in the escalating conflict.

It also demonstrates that Trump and Xi are prepared to ‘dig in’.

If you missed last week’s update on how the trade war escalated, here’s a refresher.

Mike.


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