Software companies such as Microsoft and Adobe are less exposed to tariffs than tech companies that rely heavily on hardware sales, Morningstar analysts wrote in a report this week.
Analysts estimate that about 60% of smartphones and PCs are imported from China, creating tariff-related risks for companies such as Dell, HP and Apple amid U.S.-China trade tensions.
President Trump said Tuesday that tariffs on Chinese imports “will go down significantly, but not to zero.”
Tech investors looking to reduce risk in an unpredictable trade environment may turn to software companies such as Microsoft (MSFT) and Adobe (ADBE) over tech companies that rely more on hardware sales, Morningstar analysts wrote in a report this week.
For example, they said Microsoft has “minimal exposure to retail, ad spend, cyclical hardware or physical supply chains.” Similarly, they added that Creative Cloud developer Adobe has long-term competitive advantages over many other tech companies, noting that its “moat” is wide and the risk of business disruption is minimal.
Smartphones, computers and semiconductors are currently exempt from President Donald Trump’s “reciprocal” tariffs, but the administration has warned that new tech tariffs could be introduced in the coming months.
Morningstar analysts estimate that about 60% of smartphones and PCs are imported from China, creating tariff-related risks for companies such as Dell (DELL), HP (HPQ) and Apple (AAPL) amid trade tensions between the U.S. and China.
President Trump said Tuesday that tariffs on Chinese imports “will go down significantly, but they won’t go to zero.” Earlier this month, Trump had already raised import tariffs on Chinese goods to 145%, and China retaliated with 125% tariffs on U.S. goods.
