Simone Del Rosario:

The world’s most valuable company took a hit Wednesday – caught in the trade war crossfire between the U.S. and China.

Apple’s stock fell after a Bloomberg report said China’s antitrust watchdog is preparing an investigation into the App Store.

The State Administration for Market Regulation is looking into the 30% cut Apple takes for in-app spending, along with blocking the presence of other payment stores.

If the scrutiny sounds familiar, that’s because the European Union has been on Apple’s case for these exact reasons. Apple had to change its practices to comply with EU laws.

But news of China’s potential probe comes as the country retaliates against President Donald Trump’s tariffs.

The U.S.’s 10% tariffs on Chinese imports took effect Tuesday. In return, China announced 15% tariffs on American coal and liquified natural gas. They also put 10% tariffs on crude oil, farm equipment, and other American-made vehicles. The counter-tariffs are set to take effect on Feb. 10.

China also put export controls on a number of rare earth metals, including tungsten and indium.

Trump’s response was muted.

Reporter: What’s your reaction to China’s retaliatory tariffs?
President Donald Trump: It’s fine, It’s fine. We’re gonna do very well against China and against everybody else.

Trump: The deficit with China is about a trillion dollars, think of it, a trillion dollars. They’re using our money to build their military. And Biden let that happen.

Simone Del Rosario:

As we can see from Apple, China’s response extends to American companies. On Tuesday, China put two of them on its “unreliable entity” list, putting them at risk of sanctions. That is American clothing company PVH Corp, which owns Tommy Hilfiger and Calvin Klein, and biotech company Illumina.

The same Chinese regulator that’s reportedly looking into Apple officially launched an investigation into Google on Tuesday. But didn’t lay out what it accuses the tech giant of doing. Google products like Search are blocked in China, so China only accounts for about 1% of the company’s revenue.

Apple is a different story. As China scholar and former Apple insider Doug Guthrie told us in October, the nation is crucial to Apple’s business.

Doug Guthrie:

Apple’s in China for the long run, like Apple is married to China.

Apple works with 1600 factories in China, and they’re very much deeply embedded, not just to get access to the excellent production that the Chinese factories do, but also in terms of really embedding what we call tacit knowledge into those Chinese factories

Simone Del Rosario:

Bloomberg’s sources say the investigation comes from Apple’s disputes with major Chinese developers like Tencent and Bytedance, TikTok’s parent company.

Those sources also said the regulators think Apple charges Chinese developers too much and believe the ban on third-party app stores and payment methods hurts competition.

They said if Apple fails to make preemptive changes, China could launch a formal investigation.

Guthrie says Apple’s sales success in China depends on how the government views it.

Doug Guthrie:

We always think, well, people are just buying the best product for the cheapest value that they can get. It. That’s not how it works. In China, people buy what products are promoted by the government.

Apple shares opened Wednesday down about 2% on the news. The stock is down more than 6% from its high price this past week as trade tensions intensify.