The Trump administration's sweeping global tariffs and the potential for a spiraling trade war has hit stocks hard. While some bargains will likely emerge from the chaos, investors should choose wisely. Apple (NASDAQ: AAPL) and Wayfair (NYSE: W) were already having multiple issues before Trump took office, and tariffs will only make things worse.
Too many things are going wrong
Apple uses Chinese manufacturers to produce most of its devices, along with some partners in India, Japan, South Korea, Taiwan, and Vietnam. With essentially every country hit with some level of tariffs from the Trump administration, that diversification isn't protecting the company.
Tariffs could force Apple to raise its already high prices, reducing demand for its iPhones and other gadgets. However, there were plenty of reasons to avoid the stock even before widespread tariffs were announced.
First, Apple has failed to find a true second act after its iPhone. iPhone sales are flatlining, with revenue from the iconic device down in the quarter that ended Dec. 28, 2024. Apple's Vision Pro headset doesn't look like it's the answer, with the company reportedly scaling back production due to weak demand.
Second, Apple is reportedly struggling to bring useful artificial intelligence (AI) features to its devices. The company has delayed some AI features, including an improved version of its Siri assistant, as it grapples with inconsistent performance. This may not be Apple's fault -- AI models have plenty of limitations -- but these delays certainly won't help the company sell more iPhones.
Third, the $20 billion gravy train from Alphabet's Google could be coming to an end. Google reportedly pays Apple $20 billion annually to make its search engine the default on Apple devices, but an ongoing antitrust suit against Alphabet could upend that deal. Apple's services segment is on a $100 billion annual revenue run rate, but a sizable chunk of that total could vanish if the Google deal falls apart.
Tariffs will only make matters worse for Apple. Buy the dip at your own peril.
Sales were declining before tariffs
Wayfair's business model ultimately boils down to selling cheap foreign-made furniture and household items online. Wayfair depends on Chinese suppliers but also on suppliers in other Asian countries. None of those countries have been spared from the Trump administration's tariffs.
Wayfair stock plunged after the initial tariff announcement, but the stock was already down big from its pandemic-era peak. Wayfair has been struggling with slumping sales over the past few years. While the situation has been stabilizing, tariffs throw a wrench into the company's turnaround.
Wayfair's sales dropped 10.9% in 2022, fell 1.8% in 2023, and slumped 1.3% in 2024. The company managed to grow sales slightly in the fourth quarter of 2024 and has made considerable progress reducing its losses. However, Wayfair still posted a net loss of $128 million on $3.1 billion in revenue during the fourth quarter.
Tariffs could negatively impact any progress Wayfair has made as higher prices push down demand. The company was already in a tenuous position going into 2025. While sales were up in the fourth quarter, the number of active customers dropped 4.5%. Wayfair has enough cash on its balance sheet to weather the storm for a while, but the situation could become dire if tariffs remain in place for too long.
While all retailers will be hit by tariffs to a degree, Wayfair is starting from a particularly weak position. I'll be staying far away from the stock, no matter how cheap it gets.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.
