Why Trump rates are even shaking

When President Trump announced radical tariffs this week, some of the largest technological companies had obvious reasons to worry.

Apple, Dell and Oracle, which depend on global hardware and supply chains that are in the direct fire line of the rates, saw that their actions become free fall. But there was another great technology company whose shares took a beating despite the fact that their main business has little to do with hardware: goal.

The company's shares, owner of facebook, instagram and WhatsApp, fell from $ 52 to $ 531.62 on Thursday and went down again on Friday. In total, Meta showed a huge 9 percent of its market capitalization on Thursday.

The reasons for the finishing slide are less obvious. But close observers of social networks and the Metverse company know that it is so vulnerable to the commercial actions of Mr. Trump as some of his companions of Silicon Valley, even if the details are more complicated. Here is why.

What does a goal? It is not in the same hardware businesses as Apple or Nvidia.

That is not entirely true, but for our purposes let's see the main business business: digital advertising.

Meta Rakes in billions of dollars in income selling ads on facebook and instagram. Some of those advertisers are great brands, including Procter & Gamble, L'Oreal, McDonald's and Nestlé. These companies buy ads on facebook for the so -called brand awareness campaigns. Think about it as a way to push people to buy a specific product like Q-Tips instead of cotton generic swabs the next time they go to the store.

But the vast majority of target advertisers are small and medium enterprises.

These companies buy a different type of ad, called “direct response advertising.” These ads generally encourage an action of some kind, such as downloading the application of a company or buying a kitchen device presented in an instagram video.

Electronic commerce transactions such as these constitute a huge amount of the successful target online advertising business. Susan Li, Financial Director of Meta, said in a profit call this year that online trade advertisements were the “largest taxpayer to growth year after year” for the company's advertising.

So what does that mean?

The effect of rates on the target advertising business is simple. Many of his small and medium advertisers are from around the world. The tariffs of President Trump will make it more expensive for them to sell their products to customers in the United States.

It is likely that it leads to a setback in the general purchases of consumers and fewer people who buy products on facebook and instagram. That could, in turn, bring brands to spend less on advertising on those applications.

This seems hypothetical. Could that really lead to such a large stock of stock?

Meta has additional complication factors that can affect your business more than other advertising companies.

Last year, the company revealed that 10 percent of its revenues in 2023 were from Chinese companies that largely spent on advertising on facebook and instagram, an advertisement for ads for establishing a point of support in the lucrative western markets.

Much of that growth was driven by the explosive expansion of the Fast Fashion Company Shein, based in Singapore but has a supply chain that is largely in China, and the APP Temu electronic commerce, a low -cost company and amazon owned by the Pinduoduo of the Chinese electronic commerce conglomerate. It is estimated that Temu spent $ 3 billion in marketing costs only in 2023, according to Bernstein Research estimates.

Chinese companies and goods have been affected by President Trump's rates. In addition, Mr. Trump eliminated the “exemption of minimis”, which had exempted exporters who send valued goods to less than $ 800 for having to pay tariffs. The exemption was essential for the business model Temu and Shein to sell low -cost goods to Americans.

If Mr. Trump's tariffs are maintained, they could drastically damage these exporters of cheap Chinese products, which means they could reduce their advertising on facebook and instagram.

How exposed is this goal?

In an investor call last year, Li defended the company's exhibition to any fluctuation in the spending of Temu and Shein.

She said that two thirds of Chinese target admission came from advertisers “outside the 10 best spending in that country in 2023”. His point is: even if Temu and Shein retired, many other Chinese advertisers were still buying facebook and instagram ads.

Unfortunately, this wide advertiser base is not coverage against Trump's rates, which will affect all Chinese advertisers.

“Because their Chinese admission is distributed so uniform, it is actually worse for them now,” said Eric Seufert, an independent mobile advertising analyst who follows the goal. “They not only have to worry about Temu or Shein falling. They have to worry about everyone.”

Goal did not respond to comments requests.

Oof.

To be fair, goal is not alone. Electronic commerce technology companies such as Shopify and Stripe could face winds against whenever global trade slows down. Google and amazon also have huge advertising businesses that could be hindered by a setback in the spending of Chinese companies.

We will hear the defense of Meta soon. The company is expected to answer the investors' questions when it informs the quarterly profits of this month.