The news: Financial markets continued to crash Friday after China announced a 34% retaliatory tariff on all imported goods from the US starting April 10 in response to the Trump administration’s “Liberation Day” tariffs earlier in the week, per CNBC. 

The Nasdaq dropped 8.9% last week, pushing it into bear market territory as Big Tech companies continued to suffer losses estimated at $1.4 trillion dollars in collective market capitalization, per Bloomberg. 

A challenging environment: Companies reliant on Chinese production and China’s consumer base are now trapped in between escalating production costs and increased import taxes in their biggest growth market.

• Apple is caught in the fallout from China’s new tariffs, even as it shifts production to India and Vietnam—countries already hit by new Trump tariffs of 27% and 46%, respectively.
• 25% of goods sold on Amazon come from China, per The Economic Times, Import cost increases could disrupt their model for affordable and easily accessible goods.
• Microsoft—and to a lesser extent Nvidia—also suffered huge losses in the market turmoil. Their outlook is tempered by tariff exceptions on semiconductors, but even those might be short lived, per Gizmodo.
• Nintendo delayed its US Switch 2 preorders, saying it’s evaluating the effect of 24% tariffs on Japanese imports, signaling a potential price increase for the console. 

Tech giants must diversify: Focusing on businesses that they can control rather than those undergoing trade turmoil could help offset mounting losses. 

• Apple—whose App Stores, streaming video-on-demand (VOD), music subscriptions, purchases, payments, and advertising are its fastest-growing businesses—could extend user loyalty by focusing on new content and AI services. 
• Similarly, Amazon could continue to bundle value services into its Prime memberships to sustain profits or expand standalone Prime Video subscriptions to be more competitive.
• Microsoft’s AI expansion gives it opportunities to upsell Microsoft 365 subscriptions with cutting-edge features. Being the No. 1 game publisher in the world gives it prospects for profiting from game distribution on competing platforms.

The caveat: A shift from products and hardware to digital services and subscriptions could bolster growth and offset economic anxiety. But any expansion needs to be made easy and affordable for price-sensitive customers.

US consumers are already tightening their belts, and 29% of US adults canceled subscriptions/memberships as a result of changes to household budgets in October, per TransUnion.

Our take: Diversified Big Tech platforms can increase their revenue per user through creative bundling and expanding digital entertainment and services ecosystems by ramping up value for existing customers.