An escalating trade conflict between China and the U.S. could hurt Big Tech, thus pressuring the broad S & P 500, according to Piper Sandler. Trump this month signed an order imposing a 10% tariff on goods from China. In turn, China announced retaliatory tariffs of up to 15% on select U.S. imports, including coal and liquefied natural gas. The problem is many of the largest companies in the S & P 500 by market capitalization obtain a huge chunk of their revenue from China. Given the S & P 500’s dependence on major tech stocks, these levies could spell trouble for investors going forward. “Between the 2014/2015 China bubble burst, and the 2018 trade war, small cap exposure to China sales has barely grown. But large caps became almost 2x more reliant on China sales to push their topline growth,” wrote chief global economist Nancy Lazar. “S & P large caps — particularly tech — are heavily exposed to a China that is both wobbly economically, and increasingly hostile to foreign businesses. Trump 47 theatrics will raise the temperature, and the stakes,” Lazar added. She noted that 14% of all sales in the tech sector came from China in 2024. For the broad market index, that totaled 7.5%. Within the tech sector, semiconductor stocks are the most exposed. Lazar highlighted these companies get 20% of their sales from China. This group includes high-flying names such as Nvidia, which has been the stalwart of this bull market run. Over the past year, the stock has rallied 81%. Other industries at risk from tariffs include energy and consumer discretionary, particularly auto manufacturers, Lazar said. Pharmaceuticals and personal care firms are also especially “exposed to Beijing’s anti-foreign business campaign,” she said. Lazar added that companies who have previously lobbied against China could face repercussions if the U.S.-China trade war ramps up. ” PVH was likely retaliated for the 2021 Uyghur Forced Labor Prevention Act passage fallout. The GOOG investigation may have been from Android fees,” Lazar said.
