When Terry Gou speaks, investors listen. In a stark statement, the head of Foxconn has warned that the biggest challenge the world’s largest electronics contract manufacturer faces is the trade dispute between the US and China.
On Monday, United States President Donald Trump announced he would target US$200 billion of Chinese imports, slapping 10% tariffs on an array of products. The decision came after Beijing retaliated to earlier White House moves in a tit-for-tat tariffs war.
As tensions rise, China is also contemplating singling out major Wall Street-listed companies, such as Apple, Boeing and Caterpillar, the country’s state-owned media reported.
This long-running dispute has escalated in the past few months with Trump pledging to cut the ballooning trade deficit with China and stamp out intellectual property theft. A charge Beijing has denied.
“The biggest challenge we’re facing is the US-China trade war. In terms of how we manage and adapt, this is something all our high-level managers are making various plans on,” Gou said at the company’s annual general meeting, without going into details.
“What they are fighting is not really a trade war, it’s a tech war. A tech war is also a manufacturing war,” he said.
The ripples have already be felt in major Asia markets this week. On Tuesday, the Shanghai Composite Index plunged 4% before recovering slightly.
Foxconn, or Hon Hai Precision Industry Company, includes blue-chip brands Apple, Amazon and Sony among its client list, and has more than one million employees with factories spread across China.
Based in Taiwan, the high-tech giant manufactures a vast range of electronic products, such as iPhones, and could end up being caught in the middle if the trade dispute turns into a full-blown trade war.
The ripples have already be felt in major Asia markets this week. On Tuesday, the Shanghai Composite Index plunged 4% before recovering slightly to close at 2,906.43. But it still dipped below the psychological 3,000-point barrier for the first time since September 2016.
In Hong Kong, the Hang Seng Index fell 2.78%, while the China Enterprise Index shed 3.18%. Elsewhere, Japan’s Nikkei was down 1.7%, while the KOPSI in South Korea fell more than 1.5%.
“The tit-for-tat [tariffs] brings the two sides closer to a trade war,” Louis Kuijs, the head of Asia Economics at Oxford Economics, pointed out in a note to CNBC.
On Friday, markets were mixed after the overnight dip on Wall Street. Japan’s Nikkei 225 slid 0.78%, or 176.21 points, to close at 22,516.83, while the KOPSI reversed early losses to finish up at 2,357.22.
In China, the Shanghai Composite climbed 0.49% to 2,889.95 points and the Shenzhen Composite Index was up 1.21%. Hong Kong’s Hang Seng, meanwhile, edged higher by 0.15% to close at 29,338.70.
Still, this “ugly end to an ugly week,” as the Wall Street Journal aptly described the past five days, has been a warning shot across the bows of companies with a foot in each camp, such as Foxconn.