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Apple dismal sales figures in China have triggered a mini tsunami on the US stock exchange last week, with Apple stock losing 10% on January 3rd, wiping out $74.6 billion in Apple market cap and dragging down the Dow 660 points in a single day.

Many US investors may wonder whether this precipitous drop is little more than a knee jerk reaction to a one-time event or, on the contrary, the harbinger of a deep-seated problem with the US economy.

I would argue that the former is much more likely and here’s why.

Many analysts have attributed this sudden slump of Apple sales in China to the slowing Chinese economy. In my opinion two more important factors are at play:

The trade war with China may have elicited a “patriotic” reaction from the Chinese consumers, prompting them to spurn American products, whose poster child is the Apple’s Iphone.

More problematic for Apple, the drop in Iphone sales may be due primarily to the declining competitiveness of Apple products compared to domestic alternatives on the Chinese market. Compared to Huawei or ZTE smartphones (the two largest consumer electronic firms in China), the basic version of the Iphone is now grossly overpriced and falls short feature wise (smaller screen, lower resolution, slower processor, while iOS has lost its user-friendliness advantage over Android).

Whether these two factors, protectionism and loss of competitivity, can be applied to the US economy as a whole is doubtful.

I am confident that the game of chicken between the US and China on trade will come to a mutually satisfactory resolution in the near future, that is, as soon as the pissing contest opposing President Trump to president Ping comes to an end (not losing face is very important in Chinese (business) culture whereas Trump prides himself on being a tough negotiator). However mutual business interests will inevitably prevail in the end.

I also doubt the loss of competitivity of Apple’s products is any indication of impending doom for Silicon Valley as a whole. Whereas Apple has lost its ways years ago by becoming more of a luxury brand than a tech company offering cutting-edge products, myriad other US tech companies such as Google and Amazon are likely to retain a firm grip on world leadership for years to come, at least outside China.

Finally, the most important reason why I am so little preoccupied by Apple’s misfortune in China is that of all industrialized nations, the US economy is by far the least dependent on foreign trade. In 2016 US exports represented only 12.6% of its GDP versus 19.6% for China, 29.4% for France and a whopping 46% for Germany.

If anything, Apple’s woes in China should make investors jittery about the future of the German economy as Chinese companies continue to improve the quality of their products, not only in consumer electronics but also in the industrial sector, thus placing them in ever more direct competition with German industrial exports worldwide.

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