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The Journal Gazette

  • Associated Press Women are reflected on an advertisement for Apple's MacBook computer on display near a shopping mall in Beijing. American companies are seeing their profits hurt as the trade war hurts the Chinese economy, slowing its growth. 

Friday, February 22, 2019 1:00 am

Trade war taking toll on earnings

Big-name companies report sales declining as China growth falls

DAMIAN J. TROISE | Associated Press

NEW YORK – Companies making everything from computers to construction cranes are seeing their profits hurt as the United States' trade war with China causes the world's second largest economy to slow.

Apple is selling fewer iPhones in China and Caterpillar fewer bulldozers. Nvidia, a maker of graphics chips for video game consoles, reported a drop in its revenue.

Intel and 3M are among the other big-name companies who've recently blamed circumstances in China for their worsening financial outlooks.

More broadly, any companies making the majority of their revenue outside the U.S. fared worse on earnings and revenue growth during the fourth quarter. They'll likely see further declines this year.

China's economy grew at the weakest annual rate last year since 1990. Demand for Chinese exports faded last year and the International Monetary Fund expects China's growth to weaken further in 2019.

Much of the current trade uncertainty hinges on a deadline, just over a week away, that could see the U.S. hike its tariff on $200 billion worth of Chinese goods from 10 percent to 25 percent on March 2.

President Donald Trump imposed the penalties last year over complaints Beijing steals or pressures foreign companies to hand over technology. Beijing retaliated with higher duties on U.S. goods and told its importers to find other suppliers. That led to a 40 percent drop in Chinese imports of American goods in January.

The dispute has already raised costs of goods for companies and consumers. An escalation of the trade fight would ripple through the global economy, said Mark Schofield, managing director at Citi Research.

Citi's base case for an immediate resolution involves a preliminary trade deal that would likely keep tariffs, and uncertainty in place. At worst, an escalation adds costs to companies and more volatility to the market, he said.