Apple's lowered revenue outlook is more than just the latest bad headline out of Silicon Valley — it's another example of President Donald Trump's impact on the tech world.
Trump, who campaigned as a champion of America's "forgotten" blue-collar workers and manufacturers, is nevertheless linked tightly to the elite tech industry through his policies, rhetoric and political fortunes.
CEO Tim Cook's announcement Wednesday that Apple had lowered fiscal first-quarter sales expectations cited China's faltering economy amid Trump's escalating trade war with that nation as a primary culprit.
"We believe the economic environment in China has been further impacted by rising trade tensions with the United States," Cook told CNBC on Wednesday. He also mentioned inflation and a market trend toward replacing iPhone batteries that the company suggests is cutting into new hardware sales.
Apple's shares plunged on the news Thursday, adding to steep losses for the Dow Jones Industrial Average.
Trump's tech impact extends well into Silicon Valley. As part of his attacks on Jeff Bezos, the president has accused Amazon of taking advantage of favorable postal rates and paying less than its fair share of taxes. Facebook and Twitter have seen their reputations damaged in the fallout from revelations that Russia used those platforms to deploy a disinformation campaign meant to aid Trump in the 2016 U.S. election. And Trump has accused Google of political bias and "suppressing voices of Conservatives."
The collateral damage cuts both ways. The tech sector led the stock market's precipitous decline, a rout that has also hurt the president, who points to stock market gains as a symbol of his success overseeing the economy.
Indeed, Silicon Valley was an early beneficiary of the Trump presidency. The anticipation and subsequent realization of a generous corporate tax cut helped the rocket-propelled rise of the so-called FAANG tech stocks along with the broader market and fueled a giddy optimism in the economy.
But as Trump's trade war with China intensified — and the effects of the stimulus wore off — steep declines in each company's market value followed. Coupled with threats of increased regulation over the industry and a general public unease over privacy, it's unclear whether that unbridled growth and optimism will return.
Trump, trade, tariffs and tech
Cook's letter to investors, which revealed lower-than-expected sales mainly in China, sent Apple shares tumbling.
While the U.S. and China agreed in December to temporarily stop imposing new tariffs, uncertainty surrounding the ongoing negotiations have undermined market confidence in both countries. The U.S. and China have already imposed tariffs on billions of dollars' worth of each others' goods.
Trump, who has described himself as a "Tariff Man," has used the threat of import duties as a cudgel against China.
But critics, including tech companies, have decried the tariffs as an indirect tax on Americans that could slow growth and even threaten an economic recession.
Apple itself sent a letter to U.S. Trade Representative Robert Lighthizer in September, warning that proposed tariffs on $200 billion worth of Chinese goods would affect its product sales.
The New York Times reported Wednesday that Lighthizer has told friends and associates that more tariffs on China may be necessary in order to avoid striking a subpar trade deal with Beijing.
If the U.S. does apply more tariffs, Apple's big-ticket items could be severely hurt, said William Reinsch, a senior adviser at the Center for Strategic and International Studies and an ex-undersecretary of Commerce for export administration during the Clinton administration.
"It's created a lot of uncertainty," Reinsch said, "because that would cover iPhones and laptops and it would cover them in a very significant way. That has caused a lot of anxiety in the industry."
Apple is no outlier in its industry. Each of the five FAANG stocks fell into correction territory in November, collectively wiping out more than $1 trillion in market value from their recent highs over the summer.
Trump's tech targets
Even before entering the White House — and even while using their products — Trump was critical of tech companies.
In 2013, Trump complained in a tweet that Apple "must go to a larger screen now--asap!" After saying he sold his Apple stock in 2014, Trump said the company's co-founder, Steve Jobs, "is spinning in his grave — Apple has lost both vision and momentum — must move fast to get magic back!"
Fast forward to September 2018, when Trump warned that his retaliatory tariffs on Chinese imports could raise Apple's prices, and urged the company to "start building new plants now" in the U.S.
Trump tweet Apple prices may increase
Meanwhile Trump has targeted Amazon CEO Bezos' e-retail behemoth with even more venom. In April, Trump accused the company of ripping off the U.S. Postal Service at U.S. taxpayers' expense, even though the Postal Service is not funded by tax dollars and had lost money well before Amazon's rise.
Trump tweet THEY LOSE A FORTUNE
He also slammed the company's former internet sales tax practice of not collecting state sales taxes for "third-party" sellers on its platform in most of the country, claiming they were "putting many thousands of retailers out of business!" Amazon has since started collecting sales taxes in every state.
Bezos owns The Washington Post, which Trump has often falsely slammed as a purveyor of "Fake News."
Trump has lodged the same accusation against Google, accusing the search engine leader of slyly bumping up bad news and suppressing positive stories about him.
In late August, Trump asserted that Google's results were "RIGGED."
The California effect
The tech industry's current strife holds political and economic significance in blue state California, another one of Trump's favorite targets. Some longtime California economists are now predicting the overall tech sector could face more turbulence ahead.
"California could certainly have a slowdown in 2019, although I think the longer-term prospects remain intact," said Stephen Levy, executive director and senior economist at the Center for Continuing Study of the California Economy, a Palo Alto-based research group.
Expanding tech companies helped lead the San Francisco Bay Area out of the previous recession, and have been a main driver of high-paying jobs in the state. The November statewide unemployment numbers in key tech centers in California were more than a percentage point below the national rate of 3.7 percent.
But a slowdown of the state's economy could put pressure on California's congressional delegation and potentially have wider repercussions for the national economy. Tech could "see a bumpy six months or a year," Levy said, a prospect that could spill over into the next election cycle.
California Republicans have already paid a steep price for being linked to Trump. While California traditionally votes for Democrats in presidential races, it includes several red districts. In last year's midterm vote, however, Democrats flipped seven Republican-held House seats and seized every district in the GOP stronghold of Orange County.
That left California with seven House districts held by Republicans – out of 53 total.