Trade War’s Impact: Key Companies Vulnerable to Tariffs

Uncertainty surrounds President Trump’s trade war and its future trajectory. Although the stock market has rebounded from the April “Liberation Day” crash, several high-profile companies continue to face risks due to tariffs and the broader economic climate. For instance, Walmart recently informed investors that it plans to raise prices on some items as tariff costs rise. Conversely, Home Depot has opted not to increase prices but will discontinue certain products.

The trade war has also affected many artificial intelligence (AI) companies. Nvidia and Advanced Micro Devices recently reported significant writedowns due to new export restrictions on inventory meant for China. While these AI stocks have experienced some price recovery, others may struggle in the current environment.

Image source: Getty Images.

1. Apple

As a major player in the tech industry, Apple (NASDAQ: AAPL) has considerable exposure to ongoing tariffs. The U.S. and China have paused some mutual tariffs for 90 days to facilitate negotiations, but Apple faces challenges because much of its production occurs in China. The company warned during its latest earnings call that tariffs could result in a $900 million loss in the fiscal third quarter as it shifts its supply chain to source U.S. products from India. Meanwhile, it can still sell products made in China in regions with no tariffs.

Since Apple’s products, including smartphones and laptops, are largely discretionary, a prolonged trade war could lead to reduced consumer spending. If prices rise, customers may postpone purchases or opt for cheaper alternatives. Apple’s resilience during economic downturns is largely untested; it has not faced a recession since the Great Recession, which came early in the iPhone’s lifecycle.

Additionally, China represents a critical market for Apple. A sustained trade conflict could harm the Chinese economy and provoke consumer backlash against American brands like Apple. Year-to-date, Apple shares have fallen nearly 20%, lagging almost 10 percentage points behind pre-“Liberation Day” levels, while the S&P 500 has remained stable.

Given the current economic conditions, a rebound for Apple might be difficult. Shares could face further decline if the trade situation escalates or a recession occurs.

2. Intel

Intel (NASDAQ: INTC) has struggled with various challenges, notably missing out on the mobile transition and losing market share to AMD in the PC sector. It faces an uphill battle in the rapidly growing AI market, having failed to meet its 2024 sales target of $500 million for its Gaudi 3 accelerator.

Intel’s exposure to the trade war is multifaceted. On one hand, it has benefitted from the CHIPS Act, receiving up to $7.87 billion in funding for chip manufacturing. As the largest American chip manufacturer, Intel is considered a strategic asset by the U.S. government. However, the cyclical nature of its core PC business makes it highly sensitive to economic fluctuations. In the event of a recession, PC sales may decline sharply.

While there are currently no tariffs imposed on computers imported from China, this could change based on the outcome of trade negotiations. With around $50 billion in debt and ongoing operational challenges, Intel faces a precarious situation. Despite limited direct tariff exposure currently, a trade war could instigate a recession, significantly affecting Intel’s already vulnerable position.

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Jeremy Bowman holds positions in Advanced Micro Devices, Home Depot, and Nvidia. The Motley Fool has stakes in and recommends Advanced Micro Devices, Apple, Home Depot, Intel, Nvidia, and Walmart.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.