Pulling The Plug

Sonos issue profit warning

Image source: Jochen Schoenfeld, ClassyPictures, Elnur - Shutterstock, MANGOTEETH @ralph - Trump

What's going on?

US trade tariffs on China have hit a bum note with Sonos: the American smart speaker company warned this week that its 2020 earnings might not sound too great.

What does this mean?

The trade war’s made a lot of noise lately, and it’s been US companies who’ve had to face the music. That’s because American tariffs on Chinese-manufactured goods – both those already introduced and those kicking in next month – affect a host of products, including consumer electronics like Sonos’s speakers.

Those increased costs have left Sonos with a tricky choice: either the company itself covers them, or its customers do in the form of higher prices – in turn putting demand at risk. That probably won’t sit right with Sonos, which faces stiff competition from Apple, Google, and Amazon’s smart speakers. Even so, the company has its ears on the prize: it views competitors’ products as “stepping stones” to its own premium offering, and it’s now bought Snips – a French privacy-focused AI voice platform – to better compete (tweet this).

Why should I care?

For markets: Trade snore.
The trade war’s cast a long shadow over global stock markets lately, which are spooked by the risk of Sonos-esque profit warnings. But Asian markets fell on Thursday morning as investors weighed the impact of a US Congress bill supporting Hong Kong’s protestors. That could further hurt US-China relations and make a trade deal less likely.

Zooming out: Lucky Apple.
The US president is reportedly considering exempting tech giant Apple from the next round of China tariffs. The company’s size might explain its special treatment: as the biggest public company in the US, it’s of massive importance to the country’s stock market. The US president might also want to avoid hurting consumers in the coming holiday season – especially with his big reelection bid coming up next year.

Originally posted as part of the Finimize daily email.

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