Apple and Amazon earnings normally steal the show. But the “will they won’t they” trade relationship between the U.S. and China is grabbing their limelight.
The market wants to know if the two countries will talk and if they will lower tariffs as a result. Beijing provided optimism on that front early Friday, as a Commerce Ministry spokesperson said “our door is wide open”
and that China was evaluating a U.S. offer for talks.
The Nasdaq Composite is now back above its April 2 levels, recovering from its losses after President Donald Trump’s reciprocal tariffs announcement spooked markets. The S&P 500 is just 1.2% off where it was a month ago after its winning streak extended to an eighth day Thursday.
A lot has changed since Trump unveiled those big boards, in the Rose Garden, listing all the countries and their tariffs. . From then it’s mostly been positive—a 90-day pause on tariffs and a notable lack of retaliation from other major trading partners.
Essentially, the threat of a global trade war has subsided and instead it’s a one-on-one tariffs showdown between the world’s two largest economies.
That gives companies room to maneuver—for example, the majority of iPhones shipped to the
U.S. in the June quarter will come from India and Vietnam, rather than China, Apple said Thursday. Products from those two countries face much lower levies than the 145% rate on China.
Airbus CEO Guillaume Faury
said Wednesday that the plane maker is looking at delivering aircraft to U.S. airlines at international locations to avoid tariffs.
Executives are thinking on their feet but what they, and investors, really want is lower tariffs between the two countries—the levies are so high at the moment that there’s effectively a trade embargo in place.
If the two sides can actually get to the negotiating table and move toward reducing tariffs, the subsequent rally will dwarf the recovery so far.
—Callum Keown
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Apple Outlines How It’s Shielding Itself From Trade War
Apple notched $95.4 billion in revenue for the March quarter with minimal tariff impact. But CEO Tim Cook said that a majority of current-quarter U.S. iPhone sales will come from India, which
currently faces no tariffs on smartphones. The rest will come from China as the U.S. trade war continues.
- Cook emphasized the efforts Apple was taking to operate within the U.S., including sourcing iPhone glass from an American company. It has 9,000 suppliers in the U.S. across all 50 states, he told analysts. Apple
recently announced plans to spend $500 billion in the U.S. in the next four years.
- Apple would be expanding U.S. operations in Michigan, Texas, California, and several other states. Apple is opening an advanced server manufacturing facility in Texas this year. And it expects to source 19 billion chips in the U.S., including tens of millions in Arizona.
- For the second quarter, Apple reported better-than-expected results, with adjusted earnings of $1.65 a share. iPhone revenue rose 2% from a year ago, to $46.8 billion. But Greater China revenue missed expectations by almost a billion dollars, down 2% from last year, to $16.0 billion.
- Apple said it expects June quarter revenue to grow low-to-mid single digits from last year, when revenue was $85.8 billion. At a 1% growth rate, Apple would have third-quarter revenue of $86.7 billion. At 6%, it would be $91.0 billion. The range would put it in line with Wall Street expectations at the midpoint.
What’s Next: Cook told analysts that it’s difficult to predict how tariffs will play out. But assuming the current global tariff rates, policies and applications don’t change for the rest of the June quarter, and no new tariffs are added, they estimate it will add $900 million to costs.
—Liz Moyer, Angela Palumbo, and Adam Levine
China Says ‘Door Is Open’ for U.S. Talks
China gave the market a reason to be cheerful Friday, as it signaled it’s ready to open trade talks
with the U.S. But Beijing also made it clear that it will only enter negotiations if Washington shows it’s willing to make an about-turn on President Donald Trump’s tariffs.
- Beijing is “currently evaluating” comments and messages from the Trump administration that have “expressed their willingness to negotiate with China on
tariffs,” a spokesperson for the Chinese Commerce Ministry said.
- “If you want to fight, we will fight to the end; if you want to talk, our door is wide open,” the spokesperson said. “If the U.S. wants to talk, it should show sincerity to talk, and be prepared to act in correcting its erroneous actions and canceling unilateral tariffs.”
- The White House imposed a 145% tariff on imports from China last month, although the administration later gave some tech hardware products a temporary reprieve. Trump said last week that rate would come down “substantially” if the two sides were able to negotiate a deal. Before the comments, China had responded by placing a 125% levy on imports from the U.S.
What’s Next: Investors will have to wait and see how the Trump administration responds, but any cooling of
tensions between the world’s two largest economies would likely be good news for the market. Expect stocks to rally if Beijing and Washington are able to broker a deal to ease or eliminate tariffs.
—George Glover
Amazon
Beats Expectations But Braces for Tariffs Hit
Amazon also beat expectations though it also acknowledged the challenges it faces because of tariffs, and that uncertainty could be weighing on its outlook. In addition, its closely followed cloud services division, while notching double-digit gains for the March quarter, didn’t meet forecasts.
- Amazon reported earnings of $1.59 a share and revenue of $155.7 billion. The company also gave a revenue forecast range for the current quarter of $159 billion to $164 billion—at the midpoint of the range, that’s roughly in line with the Wall Street consensus.
- The company said that forecast could be materially affected by tariff and trade policies, currency movements, and recessionary fears. The projections reflect its expectations as of May 1 and are subject to “substantial uncertainty.” CEO Andy Jassy told analysts they haven’t seen any easing of demand, yet.
- Amazon Web Services revenue rose 17% to $29.3 billion but that was slightly below expectations and its slowest pace of growth in a year. But quarterly advertising revenue rose by 18%, and was above analyst expectations.
- The e-commerce giant was in a tussle with the White House earlier this week after a report said it was going to start displaying the costs of tariffs on products sold through its Amazon Haul storefront. Amazon has since said it has no plans to implement it.
What’s Next: CFO Brian Olsavsky told analysts that Amazon was planning for various outcomes, adding that they’ve taken a number of actions to protect the customer experience. “We’re doing everything we can to keep our prices low for customers in a way that makes economic sense.”
—Tae Kim and Liz Moyer
