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Jan. 3, 2019 / 2:36 PM GMT / Updated Jan. 3, 2019 / 9:06 PM GMT
By Lucy Bayly
The Dow Jones Industrial Average closed sharply down on Thursday as investors digested some of the strongest indications yet that President Donald Trump’s protectionist policies are having a negative impact on American companies and the broader global economy.
The Dow Jones Industrial Average closed down 660 points, the broader S&P 500 fell by almost 2.5 percent, and the tech-heavy Nasdaq was down 3 percent.
Markets were dragged down by Apple’s shock announcement that it was slashing its guidance for the most recent quarter. Shares in the tech giant fell almost 10 percent on Thursday, marking the worst single-day loss for the iPhone maker in six years.
Apple Chief Executive Officer Tim Cook warned Wednesday in a public letter to investors that sales were impacted by a slowdown in China, telling CNBC in an interview that “the trade tensions between the United States and China put additional pressure on their economy.”
Apple made history in 2018 by becoming the first public U.S. company to have a valuation of $1 trillion — a crown it quickly lost in the last quarter of the year when shares fell by 30 percent — or $450 billion — as concerns mounted that the latest generation of iPhones would not have the usual robust holiday sales.
From Ford to FedEx, and Gucci to GM, Apple is just the latest company to warn that trade tensions are hitting its bottom line. Ford’s Chief Financial Officer Bob Shanks told NBC News in October that Trump’s auto tariffs have impacted the company to the tune of $1 billion.
Tesla has slashed prices on some of its models in China in order to absorb the impact of tariffs, saying it is currently operating on a 55 to 60 percent cost disadvantage.
On the retail front, Chinese shoppers will account for 45 percent of the luxury market by 2025, according to one report. A slowdown in that nation’s economy would have a widespread global impact from a nation of 1.4 billion people.
China is not the only partner with whom Trump is sparring — he slapped tariffs on imports from the European Union in June, prompting a retaliatory response from that trading bloc. That, in turn, prompted Harley-Davidson to shift production overseas for some of its motorcycles, saying tariffs would add $2,200 to each motorcycle exported from the U.S. to the E.U.
The ongoing trade skirmish between the U.S. and its closest trading partners began last summer when Trump imposed a 25 percent tariff on steel and aluminum imported from China to punish that country for what the White House considers to be unfair trade practices.
“They’re playing chicken and so far, I don’t see anybody blinking,” said Michael O. Moore, an economics professor at George Washington University. “Many businesses are quite afraid about where this is all going.”