US Big Tech Reeling from Tariff War... NVIDIA Hit Hard Due to High China Exports

Following Trump's News of Imposing Tariffs on Canada, Mexico, and China

New York Stock Market Plunges, Centered on Big Tech

Many Products Containing NVIDIA Semiconductors Are Produced in Mexico

As news broke of US President Donald Trump imposing tariffs on Canada, Mexico, and China, the New York stock market plummeted, particularly in technology stocks. As tariffs, which were thought to be merely negotiation leverage, became reality, companies with high export-import dependencies on these countries were hit hard. Recent economic indicators have consistently shown weakness, raising concerns about stagflation.

"Tariffs Stimulate Inflation"

The New York stock market was particularly affected by President Trump's statement that "there is no room for negotiation to lower tariffs on imports from Canada and Mexico." This was interpreted as Trump placing value on the tariff policy itself rather than using it as a negotiation tool. With the US January Consumer Price Index rising to the 3% range for the first time in six months, concerns that tariffs would further stimulate inflation pulled the market down.

As a result, the Dow Jones index closed at 43,191.24, down 649.67 points (-1.48%) from the previous session. The S&P 500 index closed at 5,849.72, down 104.78 points (-1.76%) from the previous session.

The tech-heavy Nasdaq index was hit the hardest. The Nasdaq index closed at 18,350.19, down 497.09 points (-2.64%) from the previous session.

NVIDIA had the biggest impact on the Nasdaq index. NVIDIA's stock price closed at $114.06, plunging 8.69% from the previous trading day.

Most of NVIDIA's semiconductors are produced by Taiwan's TSMC. However, some products containing semiconductors are produced in Mexico and other countries, making them susceptible to US tariffs on Mexico. Additionally, as the US broadens the scope of export restrictions on semiconductor companies to China, NVIDIA's sales of lower-spec semiconductors to China are likely to decrease significantly.

Mizuho Securities estimated that "NVIDIA may face significant new restrictions regarding AI chip export permits to China," adding that "this could impact NVIDIA's second-half revenue by $4-6 billion."

Big Tech Fluctuates Amid Economic Uncertainty

It wasn't just Trump's tariff policy that stimulated the New York stock market. The Institute for Supply Management (ISM) announced that the February Manufacturing Purchasing Managers' Index (PMI) recorded 50.3. This is a 0.6 point decrease from the previous month (50.9) and below market expectations. If this indicator exceeds the baseline of 50, it indicates an expanding economy; if it falls below, it indicates a contracting economy.

The Conference Board's February US Consumer Confidence Index fell by 7 points from January, recording the largest drop since August 2021. This suggests a sharp deterioration in consumer sentiment. Consumer spending slowdown is also being confirmed by indicators. Personal Consumption Expenditure (PCE) for January, announced on the 28th of last month, decreased by 0.2% compared to the previous month. This is the largest decrease since February 2021 (-0.6%).

As a result, other Big Tech stocks besides NVIDIA also fluctuated. Microsoft closed at $388.49, down 2.14%, and Amazon closed at $205.02, down 3.42%. Based on stock prices from the beginning of this year, these companies have fallen by 7.83% and 6.55% respectively.

The Wall Street Journal (WSJ) published an editorial titled "The Dumbest Trump Tariff Stock Selloff" that day. The WSJ pointed out that the US is facing economic risks brought about by 'Tariff Man' President Trump.

CNBC reported that "investor hopes for the outcome of last-minute negotiations with the two allies were dashed," and concerns about the US market outlook, led by rising prices, spread rapidly.

The Associated Press also reported that President Trump's statement that 'there is no room for negotiation to lower tariffs on imports from Canada and Mexico' hit Wall Street hard.

This volatility is also connected to the unstable situation observed in the New York stock market over the past few weeks.

Previously, the US stock market fluctuated after reports emerged that US households were pessimistic about inflation.

James Abate, Chief Investment Officer of 'Ocean Park Asset Management,' told Reuters, "There's a continuing series of bad economic news that's undermining optimism," adding, "There's a lot of uncertainty around Trump's policies, which pushes aside the mindset that the glass is half full and brings the perspective that the glass is half empty."

New York=Park Shin-young, Correspondent nyusos@hankyung.com