After a week of only minimal price action, Apple (AAPL) stock is rising steadily today on a surprising news update regarding China.
The consumer tech leader saw shares plunge in March and is still trying to make up the ground it has lost since then. Ongoing trade tensions between the U.S. and China have created difficult market conditions for many tech stocks, leading to an uncertain future for most of the industry.
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Apple is not unique in this respect, as many tech companies have high exposure to China. However, speculation that the tariffs will lead to higher prices for the iPhone, its flagship product, has caused some experts to reassess Apple’s growth prospects.
Today, however, a surprising development is buoying tech stocks, and Apple is leading the charge with gains of 6% so far.
Apple CEO Tim Cook has plenty to celebrate, as Apple stock rises on surprising news from China.
Image source: Getty Images
Unexpected news is pushing Apple stock up
This week is off to a great start for many tech stocks, including Apple, thanks to a major trade war update. After months of high tensions and tit-for-tat negotiations between U.S. President Donald Trump and the Chinese government, he and President Xi Jinping have agreed to a temporary pause on tariffs.
Related: Apple CEO sends blunt message on tariffs impact
A joint statement released this morning revealed that both nations have agreed to suspend the tariffs they have imposed on each other for 90 days while negotiations for diffusing the trade war continue. This means the U.S. will lower its tariff on Chinese imports from 145% to 30%, and China will reduce its U.S. import tax from 125% to 10%.
For companies like Apple, this is welcome news, as it eliminates much of the pressure on the company, at least temporarily. It comes shortly after Apple CEO Tim Cook estimated that the tariffs would impose a cost of roughly $900 million on his company during the coming quarter, fueling speculation that Apple’s prices would rise as a result.
Now it seems that for as long as this trade deal holds, these costs will likely decrease, an outcome that both investors and consumers have been hoping for. The best-case scenario for both groups would be that before the 90 days are over, both presidents will reach a permanent agreement that doesn’t involve future tariff spikes.
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It seems to be in the best interests of both economies to do so. However, given that many view President Trump’s actions as unpredictable, it is difficult to pinpoint how the matter will progress.
Apple investors will be watching closely for tariff updates
While many tech companies stand to benefit from this, Apple has a lot on the line as the tariff negotiations continue. Its status as a leader in consumer tech means that anytime trade tensions between the U.S. and China are high, AAPL stock is typically caught in the negotiation crossfire.
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“Apple’s valuation is naturally more closely tied to tariff policy than its other big tech rivals, which are more reliant on software and services,” 9to5Mac reports. “Apple is currently the second-largest public company in the world by market cap, sitting at $3.1 trillion. Microsoft currently holds the crown as the most valuable company, worth about $3.3 trillion today.”
That said, shares are rising steadily today for Apple and many of its big tech peers, as market momentum continues to shift in a positive direction.
This trade war update is seen as a highly bullish indicator for most tech stocks, but the question of how long it will continue remains unanswered.
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