In a letter slashing Apple's revenue guidance by several billion, CEO Tim Cook pinned the weakness on the slow iPhone sales in China due to a slowed economy, and exacerbated by deteriorating relations between the U.S. and China.
That's been a big problem for Apple, with the prospect of iPhone tariffs and manufacturing disruptions spooking investors late last year. But China also accounts for 18.3% of Apple's revenue according to Factset, and the sales miss in China was enough to send Apple's stock tanking 10% on Thursday.
In addition to softer consumer spending in China in the back half of last year, Trump's harsh rhetoric and mercurial behavior regarding trade could be having another effect: Chinese consumers souring on American brands.
Stanley Chao, a consultant who advises American brands on selling in the Chinese market, said that there's been growing disfavor among Chinese consumers towards U.S. brands -- not just Apple, but other well-known names like Nike (NKE - Get Report) and McDonald's (MCD - Get Report) .
"Based on my many trips to China this past year, there has been lots of anti-U.S. sentiment given Trump's negative comments about China," Chao said. "The average Chinese consumer is saying, 'Why should I buy a U.S. product if the U.S. hates us so much? There are so many options out there now -- Huawei, Samsung, etc. so I'll just buy one of those and not support the U.S.'"
Despite Cook's long-standing efforts to cultivate a strong relations with Chinese officials and the public, U.S. brands are now synonymous with America according to Chao. "Cook and U.S. companies can't do a thing about it," he added. "Unfortunately, Trump represents Apple, Starbucks (SBUX - Get Report) , McDonald's."
From a sales perspective, Apple introduced initiatives like promotional deals to move its new iPhone XS, XS Max and XR models. Some analysts have suggested that Apple could continue slashing prices in 2019 to stimulate demand, while other experts say that over the longer term, Apple's relatively strong services business in China could help shore up weaknesses in phone sales.
"The Apple brand value is still very alluring for the burgeoning middle class, especially among Tier Two to Four cities and the middle class," added Humphrey Ho of Hylink Digital, China's largest digital marketing agency that works frequently with smartphone makers. "Services are also likely to grow, given that the Chinese use over 100 apps v.s. U.S.'s 80 at the high-end of app installations, therefore services revenue increases."
As iPhone sales falter, many Apple investors are placing their chips on Apple's growing services revenue and future catalysts like a video streaming service and 5G phones that could arrive later this year. Speaking to CNBC on Wednesday night, Cook expressed some optimism that trade relations between the U.S. and China will improve, saying he was "encouraged" by recent discussions with both countries.