China's tariffs won't hurt US tech giants because Beijing has blocked so many anyway

Key Points
  • China's retaliatory import tariffs against the U.S. are unlikely to hit technology giants including Alphabet and Facebook.
  • Beijing has blocked many U.S. internet companies, like Facebook and Google, so they have very small businesses in the country.
  • Any tariff aimed at these firms is therefore unlikely to have a big financial impact, analysts say.
Tim Cook
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China's retaliatory import tariffs against the U.S. are unlikely to hit technology giants, including Alphabet and Facebook, because such services have already been blocked by Beijing.

On Thursday, President Donald Trump signed an executive memorandum to impose tariffs on up to $60 billion in Chinese imports. China then hit back with tariffs of its own on 128 U.S. products with an import value of $3 billion.

China's government hasn't specifically named the technology sector as one of its targets, but could potentially do so if the trade war was to escalate. Even if it did, analysts have said that the big technology giants in the U.S. would be insulated.

Facebook and Google, for example, are blocked in China by the government's internet censorship system, known as the Great Firewall.

What is China censoring online?
What is China censoring online?

In 2016, Netflix launched its biggest international push, but stayed out of China. The streaming service currently serves a small portion of its original content in China via Baidu's iQiyi video platform.

Chinese internet giant Baidu, which is often dubbed the "Google of China," is the dominant search player in China. Netflix, meanwhile, faces competition not only from Baidu, but also from Tencent and Alibaba, which have their own video content products.

Amazon has a small presence in China with its retail business and, in 2016, launched its Prime subscription service in the world's second-largest economy. Amazon is estimated to have a negligible share of the online shopping market in China, which is dominated by domestic players Alibaba and Even the e-commerce giant's cloud business in China is small in comparison to local players.

The story is similar for all the technology companies. Government censorship and rules have hampered the tech sector's ability to grow in China. And that means they have small businesses in the country, and would mean any tariffs imposed on them by Beijing would have a small effect.

Facebook stock slides 10 percent in 7 days
Facebook stock slides 10 percent in 7 days

"We continue to strongly believe that given the primarily services nature of traditional FANG names, and very internationally distributed from a revenue perspective, that Facebook, Amazon, Netflix and Google/Alphabet are 'primarily insulated' from tariff worries and a potential retaliatory trade war with China. Ultimately, the bark is much worse than the bite," Daniel Ives, head of technology at GBH Insights, told CNBC by email Friday.

Apple, perhaps, looks the most vulnerable. The company is arguably one of the only big U.S. tech firms to have a decently-sized business in China and is the fifth-largest smartphone vendor in the country. In the three months to the end of December, its Greater China revenues totaled $17.9 billion, up 11 percent year-on-year.

The Cupertino, California-based firm has been investing heavily in China and has made concessions to the government. In February, it made a move to host Chinese users' iCloud accounts in a new data center based in China, to comply with new laws.

Apple also has a manufacturing partnership with Taiwanese firm Foxconn in China. Given the strong investment and this partnership, Ives said Apple is unlikely to feel the effect of tariffs.

"For (Tim) Cook and co, given the tightly-woven integration between Apple and Foxconn in China, we believe there is minimal risk to this relationship in our opinion and the last thing China is going to do is tinker with the Apple machine and impact its significant billions of investments in the country and major consumer sales within China, despite fears," Ives said.