Apple’s shock announcement that the holiday quarter turned out worse than expected not only provided investors a warning about uglier-than-expected earnings for the company but also boosts one of President Donald Trump’s key arguments in favor of the trade war with China.
Despite reports of pain for American businesses and workers, Trump has long said that the trade war is taking a much larger toll on China than the US. Given the relative strength of the American economy, Trump argues, the US can afford to wait for the economic pain to force China into concessions.
“China, which is for the first time doing poorly against us, is spending a fortune on ads and P.R. trying to convince and scare our politicians to fight me on Tariffs — because they are really hurting their economy,” Trump tweeted on August 4.
In Trump’s line of thinking, the US can withstand blows from tariffs on $250 billion worth of Chinese goods because the underlying economic fundamentals are stronger than those in China. Apple’s sudden revenue disappointment seems to support the argument, as the company placed nearly all the blame on the shoulders of China.
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad.,” Tim Cook, Apple’s CEO, said in a letter to shareholders on Wednesday.
Cook also explicitly named Trump’s trade war a contributing factor for the Chinese slowdown.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” he wrote.
Read more: Cook blames Trump’s trade war with China as a big factor in Apple’s slowdown
Other companies are also reporting troubles in China due to the slowdown and trade war. The head of aircraft manufacturer Airbus’ China business said the trade war will have a “negative impact on China’s aviation growth.”
Kevin Hassett, the chairman of Trump’s Council of Economic Advisers, told CNN that American companies with significant operations in China will get similarly whacked.
“It’s not going to be just Apple,” Hassett said. “There are a heck of a lot of US companies that have sales in China that are going to be watching their earnings being downgraded next year until we get a deal with China.”