The Wall Street Journal which has mostly Republican ideas, wrote an article about Trump's breathtaking stupidity.

Wall Street Journal - The iPhone Canary

Apple’s sales plunge shows the need for a U.S.-China trade deal.

The Editorial Board

January 3, 2019

Investors have been searching for signs of how President Trump’s trade standoff with China is affecting the U.S. economy. Judging by the market reaction to slumping iPhone sales in China, many fear Apple is the canary in the global economy. This may be an overreaction, but the Apple warning does underscore the interdependence of the U.S. and Chinese economies and their joint stake in a trade deal.

CEO Tim Cook told investors late Wednesday that Apple is cutting its quarterly revenue forecast for the first time in 15 or so years amid falling iPhone sales in China, its third-largest market after the U.S. and Europe. “Over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad,” Mr. Cook wrote.

He added: “While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China.” Nor did investors, as Apple’s stock fell nearly 10%, leading a broader stock selloff. The 10-year Treasury yield also fell amid concerns of slowing U.S. growth and investor flight to safety.

Mr. Cook is an engineer by training, though he diagnosed the problem like an economist when he said, “We believe the economic environment in China has been further impacted by rising trade tensions with the United States. As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well.”

Note that word “uncertainty.” These columns used that word often to describe the impact of Barack Obama’s regulatory war on business. When CEOs don’t know when government might harass them next, they postpone or cancel investment and hiring decisions. That explained much of the capital strike and slow growth in the Obama era.

Trade uncertainty has a similar secondary economic impact beyond the immediate higher costs of tariffs. If CEOs aren’t sure of their supply chains, or whether tariffs will raise their costs and limit their markets, they also postpone or reduce capital spending. This explains a large part of the investment slowdown in the last half of 2018.

China’s growth rate was slowing before Donald Trump was elected, but trade tensions with the U.S. have further depressed business investment and put a dent in worker incomes, which has reduced consumer spending. Retail sales growth in China hit a 15-year low in November, and the government estimated third-quarter growth clocked in at 6.5%, which would be the lowest in a decade and is likely overstated. Prominent economist Xiang Songzuo shocked some China-watchers in December when he said China’s real growth rate may be only 1.67%.

U.S. businesses across sundry industries have been complaining about the costs and supply-chain complications of the Trump tariffs. In its third-quarter earnings report, Tesla flogged “increased import duties on components sourced from China” that are used to make its Model S and Model X in Fremont, California.

As Chinese consumers tighten their belts, iPhones have been losing market share to less expensive domestic rivals like Huawei and Vivo. Overall Chinese smartphone sales have also been falling, which has knock-on effects on U.S. businesses and workers. China is the second-biggest buyer of U.S. semiconductor exports, and its telecom firms rely on components from U.S. businesses including Qualcomm, Broadcom, Intel and Micron Technology.

American car makers have also reported falling sales in China. General Motors sales fell nearly 15% during the third quarter while Ford’s dropped 43% from the prior September. Lower foreign profits could reduce U.S. investment and returns for American shareholders and workers. Weakening growth in China has also put downward pressure on oil prices, which could prompt U.S. shale producers to reduce drilling.

The point is that President Trump can’t shield U.S. businesses from the collateral damage of his trade brawl with China even if he tried. The two countries’ economies are entwined for better or worse, which is why there’s a political and economic incentive for both sides to cut a trade deal that protects intellectual property, lowers tariffs, and above all reduces uncertainty.

The President seems to think his negotiating leverage increases as the Chinese economy suffers, and the temptation in some U.S. quarters is to see a Chinese recession as just deserts for Bejing’s policy of condoning intellectual property theft and other depredations against U.S. business.

But as Apple’s Mr. Cook made clear in his letter, a Chinese downturn will hurt U.S. businesses and economy as well. Hear that iPhone warble, Mr. Trump?

Appeared in the January 4, 2019, print edition.