The hotly anticipated meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping ended without incident despite worries that Trump’s anti-China rhetoric on the campaign trail would hurt the two countries’ relationship.
Trump’s promises to renegotiate trade deals with China and bring jobs back to America had many industries on pins and needles, as their operations depend heavily on a positive relationship with the Asian superpower.
While this week’s meetings were just the first of many, Trump and Xi were both positive about the initial conversations, saying that progress had been made and they are both interested in maintaining a solid trade relationship between the two countries.
It remains to be seen whether or not the two were just sticking to the script for the cameras and there is some question about how U.S. involvement in Syria will impact Trump’s relationship with Xi, but for now, things seem stable.
Apple Inc. (NASDAQ:AAPL), Las Vegas Sands Corp. (NYSE:LVS) and Illumina, Inc. (NASDAQ:ILMN) will all be heaving a collective sigh of relief at the news, as all three stand to lose a great deal of cash if American-Chinese relations turn sour.
Stocks That Want Good China Relations: Apple (AAPL)
Sure, the tech giant may appear to be untouchable with its massive cash coffers and its hipster image, but AAPL would actually be quite vulnerable if the U.S. cracked down on Chinese imports. Apple relies on its Chinese factories where the majority of its smartphones are assembled to keep the cost of the already expensive devices from skyrocketing.
If Trump were to follow through with his campaign promises and impose hefty taxes in an effort to get firms like Apple to move production back to the U.S., the firm might struggle to justify such a large price hike to consumers.
Not only would AAPL be hurting production-wise, but the firm’s sales would also suffer substantially. Apple makes 22% of its revenue selling phones in China. If trade talks go south, a drop in Chinese sales could cost the firm quite a bit.
Stocks That Want Good China Relations: Las Vegas Sands (LVS)
The casino industry as a whole would take a massive hit if Trump and Xi don’t continue to play nice. While several operators bring in a great deal of cash from their Chinese operations, Las Vegas Sands would be the hardest hit if tariffs were imposed and American companies were pushed out in retaliation to Trump’s policies.
LVS generated more than half of its total revenue from its Chinese operations and the firm recently invested some $3 billion in a new location in Macau last year.
To make matters worse, if the two presidents aren’t able to maintain an amicable relationship, LVS is likely to be targeted by Beijing. Las Vegas Sands chairman Sheldon Adelson has been a huge Trump supporter, and Xi could retaliate to unfavorable trade deals by attacking LVS.
Stocks That Want Good China Relations: Illumina (ILMN)
Healthcare may not be the first industry you think of when you worry about American-Chinese relations, but in fact, genetic analysis firm Illumina stands to lose a pretty hefty portion of its revenue should it become more difficult to sell in China.
The firm’s genomic sequencing technology is in high demand in China because non-invasive prenatal testing is becoming more and more popular. Not only that, but Beijing is planning to spend more than $9 billion funding precision medicine — a huge potential sales opportunity for ILMN.
At the moment, Illumina generates about 20% of its revenue from the Asia-Pacific region, and China is the firm’s largest market in that area. That data coupled with the massive potential growth opportunity from Beijing’s focus on precision medicine makes China of huge importance to ILMN’s future.
As of this writing, Laura Hoy was long AAPL stock.
