Apple and Amazon earnings normally steal the show. But the "will they won't they" trade relationship between the U.S. and China is grabbing their limelight.

The market wants to know if the two countries will talk and if they will lower tariffs as a result. Beijing provided optimism on that front early Friday, as a Commerce Ministry spokesperson said " our door is wide open" and that China was evaluating a U.S. offer for talks.

The Nasdaq Composite is now back above its April 2 levels, recovering from its losses after President Donald Trump's reciprocal tariffs announcement spooked markets. The S&P 500 is just 1.2% off where it was a month ago after its winning streak extended to an eighth day Thursday.

A lot has changed since Trump unveiled those big boards, in the Rose Garden, listing all the countries and their tariffs. . From then it's mostly been positive -- a 90-day pause on tariffs and a notable lack of retaliation from other major trading partners.

Essentially, the threat of a global trade war has subsided and instead it's a one-on-one tariffs showdown between the world's two largest economies.

That gives companies room to maneuver -- for example, the majority of iPhones shipped to the U.S. in the June quarter will come from India and Vietnam, rather than China, Apple said Thursday. Products from those two countries face much lower levies than the 145% rate on China.

Airbus CEO Guillaume Faury said Wednesday that the plane maker is looking at delivering aircraft to U.S. airlines at international locations to avoid tariffs.

Executives are thinking on their feet but what they, and investors, really want is lower tariffs between the two countries -- the levies are so high at the moment that there's effectively a trade embargo in place.

If the two sides can actually get to the negotiating table and move toward reducing tariffs, the subsequent rally will dwarf the recovery so far.

-- Callum Keown

***

Apple Outlines How It's Shielding Itself From Trade War

Apple notched $95.4 billion in revenue for the March quarter with minimal tariff impact. But CEO Tim Cook said that a majority of current-quarter U.S. iPhone sales will come from India, which currently faces no tariffs on smartphones. The rest will come from China as the U.S. trade war continues.

   -- Cook emphasized the efforts Apple was taking to operate within the U.S., 
      including sourcing iPhone glass from an American company. It has 9,000 
      suppliers in the U.S. across all 50 states, he told analysts. Apple 
      recently announced plans to spend $500 billion in the U.S. in the next 
      four years. 
 
   -- Apple would be expanding U.S. operations in Michigan, Texas, California, 
      and several other states. Apple is opening an advanced server 
      manufacturing facility in Texas this year. And it expects to source 19 
      billion chips in the U.S., including tens of millions in Arizona. 
 
   -- For the second quarter, Apple reported better-than-expected results, with 
      adjusted earnings of $1.65 a share. iPhone revenue rose 2% from a year 
      ago, to $46.8 billion. But Greater China revenue missed expectations by 
      almost a billion dollars, down 2% from last year, to $16.0 billion. 
 
   -- Apple said it expects June quarter revenue to grow low-to-mid single 
      digits from last year, when revenue was $85.8 billion. At a 1% growth 
      rate, Apple would have third-quarter revenue of $86.7 billion. At 6%, it 
      would be $91.0 billion. The range would put it in line with Wall Street 
      expectations at the midpoint. 

What's Next: Cook told analysts that it's difficult to predict how tariffs will play out. But assuming the current global tariff rates, policies and applications don't change for the rest of the June quarter, and no new tariffs are added, they estimate it will add $900 million to costs.

-- Liz Moyer, Angela Palumbo, and Adam Levine

***

China Says 'Door Is Open' for U.S. Talks

China gave the market a reason to be cheerful Friday, as it signaled it's ready to open trade talks with the U.S. But Beijing also made it clear that it will only enter negotiations if Washington shows it's willing to make an about-turn on President Donald Trump's tariffs.

   -- Beijing is "currently evaluating" comments and messages from the Trump 
      administration that have "expressed their willingness to negotiate with 
      China on tariffs," a spokesperson for the Chinese Commerce Ministry said. 
 
   -- "If you want to fight, we will fight to the end; if you want to talk, our 
      door is wide open," the spokesperson said. "If the U.S. wants to talk, it 
      should show sincerity to talk, and be prepared to act in correcting its 
      erroneous actions and canceling unilateral tariffs." 
 
   -- The White House imposed a 145% tariff on imports from China last month, 
      although the administration later gave some tech hardware products a 
      temporary reprieve. Trump said last week that rate would come down 
      "substantially" if the two sides were able to negotiate a deal. Before 
      the comments, China had responded by placing a 125% levy on imports from 
      the U.S. 

What's Next: Investors will have to wait and see how the Trump administration responds, but any cooling of tensions between the world's two largest economies would likely be good news for the market. Expect stocks to rally if Beijing and Washington are able to broker a deal to ease or eliminate tariffs.

-- George Glover

***

Amazon Beats Expectations But Braces for Tariffs Hit

Amazon also beat expectations though it also acknowledged the challenges it faces because of tariffs, and that uncertainty could be weighing on its outlook. In addition, its closely followed cloud services division, while notching double-digit gains for the March quarter, didn't meet forecasts.

   -- Amazon reported earnings of $1.59 a share and revenue of $155.7 billion. 
      The company also gave a revenue forecast range for the current quarter of 
      $159 billion to $164 billion -- at the midpoint of the range, that's 
      roughly in line with the Wall Street consensus. 
 
   -- The company said that forecast could be materially affected by tariff and 
      trade policies, currency movements, and recessionary fears. The 
      projections reflect its expectations as of May 1 and are subject to 
      "substantial uncertainty." CEO Andy Jassy told analysts they haven't seen 
      any easing of demand, yet. 
 
   -- Amazon Web Services revenue rose 17% to $29.3 billion but that was 
      slightly below expectations and its slowest pace of growth in a year. But 
      quarterly advertising revenue rose by 18%, and was above analyst 
      expectations. 
 
   -- The e-commerce giant was in a tussle with the White House earlier this 
      week after a report said it was going to start displaying the costs of 
      tariffs on products sold through its Amazon Haul storefront. Amazon has 
      since said it has no plans to implement it. 

What's Next: CFO Brian Olsavsky told analysts that Amazon was planning for various outcomes, adding that they've taken a number of actions to protect the customer experience. "We're doing everything we can to keep our prices low for customers in a way that makes economic sense."

-- Tae Kim and Liz Moyer

***

Business Urges Administration to Make Exemptions on Levies

As more companies detail tariff effects, the Chamber of Commerce urged the Trump administration to exempt small businesses and make exceptions for products not widely made in the U.S., such as coffee and bananas. The business group cited substantial risks if trade talks drag out for weeks or months.

   -- The Chamber said it's hoping to stave off a recession. It's defining a 
      small business as 500 or fewer employees. Neil Bradley, the Chamber's 
      chief policy officer, said there are 235,000 small businesses that are 
      importers, representing one third of the total value that the U.S. 
      imports. 
 
   -- General Motors said tariffs would wipe out as much as one quarter of its 
      net profit this year, with $4 billion to $5 billion in anticipated tariff 
      costs. It could partially offset that by cutting spending and 
      accelerating U.S. production. Full-year net profit is now expected to be 
      $8.2 billion to $10.1 billion. 
 
   -- McDonald's has seen two tariff effects, lower consumer spending and 
      anti-American sentiment. Store visits by middle- and lower-income 
      consumers are dropping as they see uncertainty. And executives noted 
      internal surveys that detect a pick up in negativity toward American 
      brands, especially in Northern Europe and Canada. 
 
   -- Airbnb said North America demand was growing from a year ago despite 
      economic uncertainty, though it noticed softness in travel from Canada to 
      the U.S. toward the end of the first quarter. Canadians continued to book 
      stays on the site, but in places like Mexico, where Canadian bookings 
      rose 27% in March. 

What's Next: Stephen Miller, the White House deputy chief of staff for policy, told reporters on Thursday that small business relief would come in the form of tax cuts, which are currently being negotiated by lawmakers looking to extend the 2017 tax cuts. Those negotiations could also drag out into the summer.

-- Liz Moyer and Reshma Kapadia

***

Medicare Advantage Insurers Face Kickback Allegations

Three of the largest health insurers face Justice Department accusations they paid illegal kickbacks to brokers for helping steer people into their Medicare Advantage insurance plans. It is the administration's latest scrutiny on the industry.

   -- The Justice Department sued CVS Health's Aetna insurance unit, Elevance 
      Health, and Humana and three brokers for the transactions, which it says 
      took place between 2016 and 2021. The brokers include eHealth, GoHealth, 
      and SelectQuote, according to the complaint, filed in Boston federal 
      court. 
 
   -- Private insurers offer Medicare Advantage plans and pay a set rate to 
      manage the healthcare for older Americans who want the coverage to bridge 
      gaps in their regular Medicare coverage. These consumers often work with 
      insurance brokers to find a provider. 
 
   -- But the Justice Department says the brokers directed customers to the 
      insurers that paid them the most -- amounting to hundreds of millions of 
      dollars in kickbacks -- rather than providing unbiased recommendations 
      for providers that best suit the customers' needs and preferences. 
 
   -- The lawsuit also says Aetna and Humana pressured brokers to steer away 
      disabled people, who are perceived to be more expensive to cover, 
      according to the complaint. 

What's Next: CVS Health and Humana told The Wall Street Journal they disagreed with the lawsuit and would vigorously defend themselves, and Elevance Health said it would fight the allegations. GoHealth told the Journal the lawsuit has misrepresentations, while eHealth said the claims are meritless.

-- Liz Moyer

***

Do you remember this week's news? Take our quiz below to test your knowledge. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Approaching President Donald Trump's 100th day in office earlier this week, the S&P 500 had fallen 7.8% since the inauguration. Dow Jones Market Data said that put it on track for the worst start to a presidency since when?

a. 1933 b. 1953 c. 1973 d. 1993

2. Chinese goods exported to the U.S., including communication equipment, apparel, and chemical products, are expected to contract by how much this year if President Trump's tariffs are maintained, according to Goldman Sachs?

a. One third b. Two thirds c. One quarter d. Half

3. International Business Machines plans to significantly raise its investment in the U.S., announcing it will spend $150 billion in the next five years, including $30 billion on research and development to make which of the following?

a. Mainframe and quantum computers b. Robots c. Artificial intelligence data centers d. None of the above

4. Gross domestic product contracted in the first quarter for the first time since 2022 as businesses surged imports to get ahead of tariffs. How much did GDP drop, according to estimates?

a. 1% b. 0.7% c. 0.3% d. 0.1%

5. Consumer confidence fell again in April, with the expectations index plunging to its lowest level since when?

a. October 2021 b. April 2020 c. April 2016 d. October 2011

Answers: 1( c ); 2( b ); 3( a ); 4( c ); 5( d )

-- Barron's staff

***

-- Newsletter edited by Liz Moyer, Patrick O'Donnell, Rupert Steiner

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 02, 2025 07:15 ET (11:15 GMT)

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