Nasdaq Suffers Wipe of $1.4 Trillion

There’s virtually nowhere to hide for many US technology companies under President Donald Trump’s new tariff regime, the harshest in a century.

New Tariff Regime Causes Chaos in US Technology Sector

After Thursday’s (Apr 3) slump wiped US$1.4 trillion in market capitalization from the Nasdaq 100 Stock Index, the gauge is down 16 per cent in the past six weeks. The Magnificent Seven even more, at 20 per cent. Chipmakers are in free fall. And there is little sign the pain will end anytime soon, as seen by Friday’s 2.7 per cent tumble in the Nasdaq 100 as China retaliated.

Global Hubs for Chip and High-Tech Manufacturing Hit Hard

China and Taiwan, the global hubs for chip and high-tech manufacturing, got hit with levies of 54 per cent and 32 per cent, respectively. Nascent production bases like Vietnam and India are staring at taxes of at least 26 per cent. On Friday, China said it will impose a 34 per cent tariff on all imports from the US starting on Apr 10.

Disastrous Setup for Companies Like Apple, Nvidia, and Broadcom

All of this represents a disastrous setup for companies like Apple, Nvidia, and Broadcom, US technology stalwarts that source hardware components and assembly labor from South-east Asia – and use it to make their intellectual property worth trillions. For years, they have woven intricate supply chains that have delivered billions in profits and soaring share prices. It’s a system that cannot be unwound quickly, which means these companies are faced with a difficult choice: hike prices at a time when consumers are stretched thin or absorb costs and watch profits dwindle.

Investors React with Fear

Investors reacted swiftly, sending Apple shares tumbling 9.3 per cent on Thursday after Trump announced his plan. The drop was the biggest for the iPhone maker since March 2020, erasing more than US$310 billion from the company’s market value. A Bloomberg index that tracks the so-called Magnificent Seven stocks sank 6.7 per cent.

Conclusion

The new tariff regime has caused chaos in the US technology sector, with companies like Apple, Nvidia, and Broadcom facing a difficult choice between hiking prices or absorbing costs. The situation is expected to continue causing pain for the sector, with little sign of relief in sight.

FAQs

Q: What is the new tariff regime?
A: The new tariff regime is the harshest in a century, with levies of 54 per cent and 32 per cent imposed on China and Taiwan, respectively.

Q: Which companies are affected by the new tariff regime?
A: Companies like Apple, Nvidia, and Broadcom, which source hardware components and assembly labor from South-east Asia, are affected by the new tariff regime.

Q: What are the implications for these companies?
A: The companies are faced with a difficult choice between hiking prices at a time when consumers are stretched thin or absorbing costs and watching profits dwindle.

Q: What is the outlook for the US technology sector?
A: The outlook is uncertain, with the sector expected to continue causing pain for investors.