A couple of developments related to China rocked tech stocks on Thursday as fears of an aggravation of the trade war between the world’s top two economies intensify. Against his backdrop, venture capitalist Chamath Palihapitiya shared on X data that showed the U.S. diversifying away from China.
What Happened: “First time since 2003, US imports more from Mexico than China…,” Palihapitiya tweeted early Friday and shared a graphic from BofA Securities, which showed the percentage of U.S. imports from Mexico on a 12-month moving average basis exceeded imports from China for the first time since 2023.
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Why It’s Important: The data assumes importance in the wake of the frosty relationship between China and the U.S. China has banned the use of iPhones in government offices and this along with the launch of a new phone by Chinese rival Huawei sent Apple, Inc. AAPL stock into a tailspin. The stock lost about $190 billion in market cap over the past two days, as it settled Thursday’s session down 2.92% to $177.56, according to Benzinga Pro data.
U.S. multinationals, including Apple and Tesla, Inc. TSLA have China as their major production base. China also double up as a major market for these companies and other major tech giants such as Nvidia Corp. NVDA. A potential U.S.-China trade war would stifle the recovery seen by tech companies following 2022’s dismal showing, putting further pressure on topline and margins.
The data that shows U.S. diversification away from China could be good news, allaying fears concerning a deep hit to the domestic economy. Tesla, which produces roughly half of its electric vehicles in China, currently has begun construction of a Gigafactory in Mexico.
Mexico’s rise in ranks as the top U.S. trading partner bodes well as the North American Free Trade Agreement signed among the U.S., Canada, and Mexico in 1992 eliminates most trade barriers and tariffs for goods and services trade between any of these three nations.
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