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Like it or not, Donald Trump is the next U.S. President. That means it’s time to take stock of all his gripes against technology companies and decide which statements were good for winning elections and which ones are likely to be followed up with actions. Also, which of these actions could hurt the sector and which ones could be good for it.

Here’s a brief discussion of how Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) , Alphabet (GOOGL - Free Report) , Microsoft (MSFT - Free Report) and Facebook (FB - Free Report) may be affected:

Amazon

It makes sense to discuss Amazon first because this is the company that received a huge chunk of Trump’s bashing.

Trump’s first claim that Amazon is setting off losses made by Washington Post against Amazon profits and thereby lower taxes is a bit ridiculous. As ridiculous as the claim that it is then using the paper as a tool to fend off government scrutiny. WaPo isn’t owned by Amazon but CEO Jeff Bezos, so the benefit isn’t available to the company. Besides, Amazon has always played ball on taxes because it can’t afford to close down operations.

Yes, Bezos can influence people in government to turn a blind eye to Amazon’s practices. But working with a loss-making paper (so low circulation) seems like an inefficient way to do it. Money would have worked better. Of course, WaPo’s persistent scrutiny of Trump and its practice of needling him haven’t helped things.

His second claim is that Amazon has huge antitrust problems because it is a monopolistic retailer also doesn’t seem to hold water. First of all, Amazon isn’t a monopoly. It is the largest online retailer (among a growing number of such retailers) and hasn’t cancelled the relevance and importance of traditional players. In fact, Amazon has increased focus on brick-and-mortar presence where it trails other players. Second, no one can deny that Amazon is responsible for increased competition and lower retail prices.

Most retailers aren’t able to operate on the razor thin margins Amazon keeps, which is basically the secret to its success. We can’t rule out the possibility that Amazon might raise prices in the future, but that’s a future case, not a current one. In the meantime, it’s better to keep in mind that antitrust proceedings are undertaken when there’s evidence of price fixing or unnatural price rise that can negatively impact consumers. Amazon doesn’t appear guilty.

On the other hand, Trump has promised to lower the business tax rate from 35% to 15%. There is some misunderstanding about the tax on foreign earnings in that it isn’t clear whether all foreign earnings will be taxed 10% or only the cash repatriated, which is currently taxed at 35%. If it’s the latter, it will be positive for Amazon profits. If it’s the former, Trump likely won’t follow through with the plan.

Apple

Trump doesn’t appreciate Apple’s defense of encryption and hasn’t really said where he’s going with privacy and technology advancements. Instead he’s said that he will make Apple do the FBI’s bidding on creating back doors for government snooping. If he changes the law to follow through on this threat, U.S. technology companies will have a hard time doing business internationally. They will have to move headquarters abroad or forget about selling outside the U.S.

This restriction on their growth opportunities will be crippling, which is why it sounds mostly like election rhetoric. As far as his call to boycott Apple devices is concerned, it’s unlikely that many Apple fans will oblige.

The other problem Trump has with Apple is its leaning heavily on Chinese manufacturers and he intends to impose a 45% tax on Chinese imports. He would like to bring back these manufacturing jobs and thereby lower the unemployment rate. However, this likely won’t be easy because the shift of lower-end jobs to Asia was the result of economics rather than politics. As a result, the entire supply chain and most of the talent is currently in Asia and generating the volumes Apple requires in the U.S. will be difficult. It will also raise iPhone costs and hurt consumers. Besides, the unemployment rate isn’t that high right now.

Alphabet, Microsoft and Facebook

The other big technology stocks, including Alphabet, Microsoft and Facebook will also be mourning the results. The biggest reason for concern is Trump’s position on H1B visas that help technology companies bring in required talent. Technology development thrives in a free labor market, so if there are restrictions, development activity can move overseas to places that are more conducive.

Net neutrality is another thing he’s against, which will make it easier for telecoms to charge differential rates of service providers like Google and Netflix (NFLX - Free Report) thus driving up their costs.

Trump’s other concern is clean energy spending. Most of the big technology companies have been moving toward clean energy with the help of government tax breaks. Trump’s determination to cut clean energy spending wont impact their survival but it could certainly be a dampener on these plans.  

Conclusion

No matter how foolish his positions sound on various matters and how bad they could be on technology companies, it can’t be denied that Donald Trump has won the majority votes. This means that there are enough people supporting his views.

Trump has played on the fear of declining blue collar jobs and rising healthcare costs. His focus has been on the less educated and less affluent sections of society as well as those worried about terrorist attacks. While these are real concerns, it won’t be easy to formulate policy to take care of them.

Trump seems somewhat against technological development, but pre-election rhetoric and post election activity can be two different things.

Maintaining relationships with emerging economies is essential because American companies need some place they can sell their goods and services to and you can’t expect to get something without giving up something. So that China tax doesn’t make any sense at all.

But he can very well tax companies on all profits made overseas, even if they are paying taxes in those jurisdictions. This will negatively impact their competitiveness and be a direct hit to their P&Ls, so again it doesn’t make sense.

With blue collar jobs, he seems to be moving backwards but it’s time we come to terms with the fact that every kid won’t be brilliant, and America will need her share of those jobs just as everyone else. Tech just isn’t the sector where this is possible.

All the above stocks except Facebook have a Zacks Rank #3 (Hold) rating. Facebook has a Zacks Rank #2 (Buy) rating. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

 

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