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Apple faces ‘informal boycott’ from China consumers, says Bank of America Merrill Lynch
[HONG KONG] A fall off in demand for iPhones in China may be a case of "one bad apple" when it comes to gauging the broader health of the world's second-biggest economy.
"Apple sales likely greatly exaggerate the overall weakness," Bank of America Merrill Lynch economists Ethan Harris and Aditya Bhave wrote in a recent note.
Along with a bunch of industry-specific factors and competitive reasons behind the downbeat forecast, the economists said the "‘spillover from politics into sales could be particularly high in the cell phone market" amid US-China trade tensions.
"The weakness illustrates the many ways in which the US-China trade war can hurt the US as well," they wrote, outlining three key drags:
Trade war fears have already undercut the US equity market and fears of a hard landing for China add to that pressure
The trade war tends to weaken the yuan, making a broad range of US products less competitive and lowering the dollar value of earnings overseas
Informal boycotting of US products adds further to the US-China trade deficit
Mr Harris and Mr Bhave expect the trade war could switch to having a greater impact on the US economy rather than China's by spring. That's because any further tariffs would be felt more directly by US shoppers, the boost from prior fiscal easing is fading, and China has more scope to support its economy.
"The upshot is that while China is currently slowing faster than the US, by the spring we expect growth in China to start to pick up, even as the US continues to slow down," they wrote. "Everyone loses in a trade war."