US tech, retail stocks lead rout after tariff shock

The global stock market carnage that followed US President Donald Trump's sweeping new tariffs rippled through early trading in the United States, slamming a wide swath of key industries including retail and technology firms.

The tariffs, which threaten to destabilize the world trade order and unsettle businesses, mark a sharp reversal from just a few months ago when hopes of business-friendly policies under the Trump administration pushed US stocks to record highs.

Major US retailers including Walmart, Amazon and Target, which count on several Asian countries including China as key suppliers and could be forced to raise prices, slumped between 4 per cent and 6 per cent in pre-market trading.

Apple shares fell 6.1 per cent. More than 90 per cent of its manufacturing is based in China, one of the hardest hit countries by the tariffs, according to an estimate from Citi.

"If Apple cannot get exempted this time ... and does not pass it through, we estimate about 9 per cent negative impact to the company's total gross margin," wrote Citi in a note.

Among the major global production hubs, China was hit with an aggregate tariff of 54 per cent. Vietnam was slapped with 46 per cent, Cambodia with 49 per cent and Indonesia with a 32 per cent tariff rate.

Sportswear retailers Lululemon and Nike slumped 10.3 per cent and 8.5 per cent as their key sourcing partners were hit with steep levies.

"With Asia production hubs particularly hit, all footwear and apparel company margins will be affected as costs rise," Jefferies analysts said in a note.

Auto industry and technology heavyweights were also among the losers, with General Motors down 2 per cent and Tesla falling about 5 per cent.

Stressed margins

Analysts and investors warned that the tariffs and potential retaliatory measures from other countries could rattle global supply chains, raise costs and dent corporate profit margins.

"It is hard to imagine how these tariffs would not wreak havoc upon the profit margins of major multinational corporations," said Michael O'Rourke, chief market strategist at JonesTrading.

"Unless something changes, business will retrench, only pursuing necessary projects. This will lead to a larger economic slowdown that will permeate throughout the US economy and likely the global economy."

Speaking at the White House Rose Garden on Wednesday, Trump said he would impose a 10 per cent baseline tariff on all imports. Among close US allies, Japan was targeted with a 24 per cent rate, South Korea with 25 per cent, Taiwan with 32 per cent and the European Union with 20 per cent and many trading partners vowed to retaliate.

"Retaliation could mean things get worse before they get better," said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

"That doesn't make it any easier for businesses to make clear-cut decisions about major investments in their supply chains, so we can expect volatility to stick around for the foreseeable future."

Major Wall Street lenders including JPMorgan Chase & Co, Citigroup, and Bank of America Corp, which are sensitive to economic risks, dropped between 3 per cent and 4 per cent.

US stock futures were down 2.8 per cent on Thursday, while the CBOE Volatility Index, known as Wall Street's fear gauge, spiked to a three-week high as investors fled from riskier assets.

Chips face indirect hit

Semiconductors were not named in the list of goods subject to reciprocal tariffs. While they would still presumably be hit by the 10 per cent baseline duties, that would not directly impact the industry significantly, Bernstein analysts said.

"We continue to see primary tariff impact on semiconductors as indirect," they said, pointing to how several of the products that chips go into, such as PCs, smartphones and cars, would be hit by higher tariffs.

The US imported about $82 billion worth of raw semiconductors last year from countries including Malaysia, Taiwan and Thailand, according to Bernstein.

In comparison, imports of data processing machines like PCs and servers stood at about $200 billion, while wireless phone imports amounted to about $114 billion.

"We don't see much in the way of positive feelings here for the semi group."

The iShares Semiconductor ETF was down 3.2 per cent.