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The IMF just released their latest World Economic Outlook, and comparing their pre-tariff forecast from January with their forecast today shows that they expect the trade war to have a much bigger negative impact on the US economy than on other countries, including China, see chart below.
Sources: IMF, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The trade war is all about goods. However, the US is also connected with China via sales of American products in China to Chinese consumers.
For example, McDonald’s has 6,820 restaurants in China, Walmart operates 364 stores in China, and Apple sold 43 million iPhones in China in 2024.
Calculations from FactSet’s Geographic Revenue Exposure Database show that China makes up about 7% of total annual revenue in S&P 500 companies. Comparing the magnitude of the trade deficit with the revenue generated by S&P 500 companies in China shows that US companies made $1.2 trillion in revenue selling to Chinese consumers—about four times more than the size of the trade deficit in goods between China and the US, see chart below.
The bottom line is that if the US has to decouple completely from China, it would result in a significant decline in earnings for S&P 500 companies no longer selling products to Chinese consumers.
Note: S&P 500 revenue is calculated as revenue exposure to China (6.7%) multiplied by LTM total revenue. Sources: FactSet, BEA, Apollo Chief Economist See important disclaimers at the bottom of the page.
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After Liberation Day on April 2, earnings expectations for the S&P 500 have been revised down significantly, and interest rate differentials no longer drive the dollar, see charts below.
Sources: Bloomberg, Apollo Chief Economist 
Note: Yield differential is DXY weighted. Sources: Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The Fed survey released this week shows how companies are responding to higher tariffs, and the first chart below shows that the top response is that companies are passing cost increases through to consumers.
The bottom line is that inflation will be rising significantly over the next six months, see also the second chart.
Sources: Federal Reserve Bank of Dallas, Apollo Chief Economist 
Sources: Federal Reserve Bank of Dallas, Federal Reserve Bank of Kansas City, Federal Reserve Bank of New York, Federal Reserve Bank of Philadelphia, US Bureau of Economic Analysis (BEA), Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Estimates show that more than 90% of fireworks used in the United States are imported, and 95% of fireworks imported into the US come from China, see charts below.
Similarly, there are many different categories of products that are imported into the US where demand is inelastic, and China is the only provider of that product, see below.
The bottom line is that inflation will increase significantly for the product categories where China is the main producer of that good, likely including fireworks.
Sources: US Census Bureau, Apollo Chief Economist 
Note: Represents the aggregated container volume, measured in twenty-foot equivalent units (TEU), of vessels departing China for the United States over a 15-day rolling period. Accounts for the shipping capacity being utilized, irrespective of the number of vessels. Sources: Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Since the trade war began in March, consensus expectations for growth have been revised down, and consensus expectations for inflation have been revised up, see the first chart below. This is the definition of stagflation: higher inflation and lower growth.
Under stagflation, with higher rates and slower growth, investors should stay away from growth equity and growth credit and be up in quality and invest in companies with earnings to protect against the downside risk of a recession, see the second chart.
This happens to also be how investors in public markets are positioned. Short interest in small-cap companies is at the highest level seen in many years, see the third chart. This is not surprising as 40% of companies in the Russell 2000 have negative earnings, and middle market and small-cap companies are hit by the triple whammy of higher tariffs, slower growth, and higher rates because of inflation staying higher for longer.
Sources: Bloomberg, Apollo Chief Economist 
Source: Apollo Chief Economist 
Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Almost 80% of job openings in the US economy are in businesses with less than 250 workers, and the share of job openings in small businesses has been growing over the past five years, see chart below.
Sources: JOLTS, BLS, Haver Analytics, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The OECD Trade in Value-Added database is a dataset developed by the OECD and the WTO to track the flow of goods and services across international borders, particularly focusing on the value-added contributions of different countries to global exports. Approximately 20% of US car exports comes from input imported into the US, see chart below. Across a broad range of products, the foreign value added in US exports is between 10% and 20%.
Put differently, introducing tariffs and increasing the price of US imports is going to have negative consequences for exports, in particular in the auto sector.
At a broader level, today’s dialogue should focus not only on the impact on goods imports and exports, but on long-term competitiveness, and my colleague John Zito wrote about that here.
Note: FVA intensity measure is often referred to as import content of exports and considered as a measure of backward linkages in analyses of global value chains. Sources: OECD TiVA database, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Estimates show that 90% of the inputs in prescription drugs consumed in the US are imported, and the chart below shows the product groups where the US has a high dependency on China.
Sources: Skyrocketing Pharmaceutical Imports to the US Endanger National Security | Coalition For A Prosperous America, The geography of prescription pharmaceuticals supplied to the USA: levels, trends, and implications – PMC, Apollo Chief Economist See important disclaimers at the bottom of the page.
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The employment report for April will come out on Friday, May 2, and some leading indicators suggest we could see a dramatic weakening in the labor market over the coming months.
Importantly, the survey week for the employment report was the week after Liberation Day tariffs were announced. In other words, the establishment survey and the household survey were carried out during a week with extreme levels of uncertainty for businesses.
The consensus expects 130K jobs created in April. There are significant risks the number is going to be lower, perhaps even negative, see chart below.
Sources: US Bureau of Labor Statistics (BLS), University of Michigan, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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