Trade

Samsung Joins Apple in the Trade War Gutter

JM Ashby
Written by JM Ashby

The market surged this morning based on some vague statements of optimism about trade negotiations with China, but stocks fell back down to earth after Samsung delivered grim news about their quarterly earnings.

Apple recently downgraded their projections because the trade war has drastically reduced their sales in China and Samsung followed suit this morning by cutting their projections by nearly 30 percent for similar reasons.

From the Associated Press:

NEW YORK (AP) — Samsung expects its quarterly operating profit to fall 29 percent compared with last year, adding to the tech sector’s unease about the effect of slowing global economic growth on the industry. [...]

China is a huge smartphone market, accounting for one-third of the world’s handset shipments, but its economy has been slowing and many people are leery of the rising trade tensions with the U.S. They have also begun to buy smartphones from Chinese manufacturers such as Huawei and Xiaomi. Many models are cheaper than those made by Apple and Samsung.

Tech companies are not alone in feeling the slowdown in China. Companies ranging from Tiffany & Co. to Ford Motor Co. have also warned of sales declines.

Samsung is a South Korean company, not an American company, of course, but in our global economy things like this do not happen in a vacuum. Trump's trade war does not happen in a vacuum.

China is the largest consumer market in the world. Imposing tariffs on China has led to lower economic growth in the nation of nearly 1.4 billion people, but that is not good news as much Trump wants it to be.

Slower economic growth in China means less global demand and lower global growth; it means less demand for American imports or, in this case, South Korean imports.

I'm not necessarily too worried about shareholders, but it's worth pointing out that Americans do own stock in Samsung so South Korea's loss is also our loss.

No one wins a trade war.

  • muselet

    I am thick as mince and even I know that disruptions in international trade—like, say, a trade war or three—negatively impact national economies.

    It’s a pity nobody ever managed to teach Donald Trump that fairly simple fact.

    –alopecia