This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
This is what a full-blown global trade war feels like. In what Wedbush's Dan Ives terms a "self-inflicted debacle of epic proportions," markets are on the cusp of a complete meltdown, with the Dow Jones index down 4 percent or 1,600 points, and megacap stocks in a freefall: NVIDIA is currently down a blistering ~8 percent, and Apple down another 4 percent after yesterday's ~10 percent fall.
As we noted recently, President Trump has now imposed a baseline tariff of 10 percent on all US imports, plus a veritable host of reciprocal tariffs on some of the biggest trading partners of the US, with imports from the EU now subject to a 20 percent levy while those from China entailing an eye-watering tariff of 54 percent (20 percent fentanyl-related levy + 34 percent reciprocal tariffs).
Steel, aluminum, vehicles, and auto parts - all of which remain subject to individual tariffs under Section 232 - remain exempt. Notably, imports of vehicles and auto parts will continue under a 25 percent tariff regime.
This is expected.
U.S. President Donald Trump said Thursday that tariffs on semiconductor imports will begin "very soon" in what would be an escalation of his trade fight expected to affect South Korea's chipmaking industry.
Trump says tariffs on semiconductors will start… pic.twitter.com/wmfoMo9L6H
— Ray Wang (@rwang07) April 4, 2025
While Trump has exempted raw semiconductors for now, the respite is expected to be short-lived.
TARIFF ECONOMIC ARMAGEDDON CRUSHING TECH: WEDBUSH
🔸 iPhones may rise from $1,000 to $3,500, slowing AI progress.
🔸 U.S. consumers will face higher tech prices.
🔸 Tariffs may cut tech earnings 15%, disrupt supply chains, and cause recession or stagflation.
🔸 Tech stocks… pic.twitter.com/1gFMXG17P3
— *Walter Bloomberg (@DeItaone) April 4, 2025
Even without a dedicated levy on semiconductors, many of the exposed stocks have been bleeding lately. The fact remains that consumer tech goods constitute a significant proportion of the demand for semiconductors, and these goods are now in the proverbial eye of a hurricane. For instance, unless Apple manages to win an exemption from the Trump administration, iPhones will soon cost around $3,500, leading to inevitable demand destruction.
China to impose 34% on all US imports.https://t.co/5sSF1NeKhl pic.twitter.com/kXkg9VGK4L
— David Ingles (@DavidInglesTV) April 4, 2025
This brings us to the crux of the matter. China has now imposed a reciprocal tariff of 34 percent on all imports from the US. This measure is expected to invite another retaliation from the Trump administration in a seemingly unending game of one-upmanship that will probably only end once existing supply chains have been mangled beyond recognition and the global economy is left to contend with a recession the likes of which have not been seen in decades.
Do note that many of the chip stocks, including NVIDIA, are also tumbling due to increased uncertainty. Bernstein's Stacy A. Rasgon just went live on CNBC to note that no one currently knows what the "E" in a stock's forward P/E ratio should look like. The emerging paradigm suggests that companies will not be able to pass on the full cost of tariffs to consumers, leading to a deterioration in margins. Concurrently, higher product prices are expected to lead to demand destruction and lower revenues, adding another source of uncertainty for forward earnings.
Critically, Rasgon mused that "in many cases the timeline [for resolving the current tariff-related uncertainty and the attendant earnings fallout] might extend beyond" the current administration.
