What Semiconductor Investors Need to Know About Trump's New Tariffs

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Buying opportunity? 

Maybe. Let's first break down the market for semiconductor stocks, in light of the potential new tariffs. 

Trump threatens to add another 10% to 25% tariff on Chinese imported apparel, toys and electronics -- not on semiconductors. But it's the electronics part that semiconductor investors need to watch. 

The actual tariffs directly on semiconductors coming into the U.S. from China have already happened and are priced into semi stocks. 

Indirect Impact 

"Most semiconductors move around inside other things, with the indirect effects from tariffs (demand destruction from higher-end prices, macro degradation, currency movements, etc.) much more important and more difficult to size up (for us or anyone in the supply chain), driving uncertainty," said Stacy Rasgon, Alliance Bernstein analyst in an email to investors and reporters. 

"Up until recently, however, most of the important electronic categories have been spared, but should the List-4 tariffs be applied as currently planned on Sept. 1, this will no longer be the case with smartphones, PCs, etc., now in the crosshairs," Rasgon added. Apple (AAPL) - Get Report , specifically, is under close watch from analysts and investors, with the stock down 8% from its 2019 high of $213, which it hit on July 31, the day before Trump's tariff announcement. 

With Apple products tariffed, Micron (MU) - Get Report , an Apple supplier with a significant portion of its revenue from Apple, would lose sales. Micron shares have lost 8.7% in the past five days. 

But the "demand destruction" that could be found in any electronics-supplying semiconductor name would be the thing on which to focus. 

What Should Investors Do?

As Rasgon mentioned, it's hard to price in the impact of the potential additional tariffs until management teams of both end-market electronics makers and the corresponding chip makers comment on what would happen to sales and cost structures.

Meanwhile, the added tariffs haven't yet happened and the iShares semiconductor ETF (SOXX) - Get Report is down 9.3% in the past five days. Sure, this could be a buying opportunity, but if the tariff threat is real, investors may want to wait until analysts revise estimates and shed some light on what will take hold.

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