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Why Trump's rates even rattle meta

    When President Trump announced enormous rates this week, some of the largest technology companies had obvious reasons to worry.

    Apple, Dell and Oracle Die depend on hardware and worldwide supply chains that are in the direct fire brigade of the rates go into free falls. But there was still a large technology company whose shares took a pummeling, although the core activities have little to do with hardware: meta.

    Shares of the company, which owns Facebook, Instagram and WhatsApp, fell $ 52 to $ 531.62 on Thursday and had fallen again on Friday. In total, Meta left no less than 9 percent of its market capitalization on Thursday.

    The reasons for the Meta slide are less clear. But close Watchers of the Social Networking and Metaverse Company know that it is just as vulnerable to Mr Trump's trading actions as some of his Silicon Valley colleagues, even if the details are more complicated. This is why.

    That is not entirely true, but for our purposes we let it look at the most important company of Meta: digital advertisements.

    Meta -Rakes in billions of dollars in income by selling advertisements on Facebook and Instagram. Some of those advertisers are major brands, including Procter & Gamble, L'Oreal, McDonald's and Nestlé. Those companies buy advertisements on Facebook for so -called brand consciousness campaigns. Think of it as a way to push people to buy a specific product such as Q tips instead of generic cotton cotton swabs the next time they go to the store.

    But a large majority of Meta advertisers are small and medium -sized companies.

    Those companies buy a different type of advertisement, called 'Direct Response Advertising'. These advertisements usually encourage a kind of action, such as downloading the app from a company or buying a kitchen gadget on an Instagram video.

    E-commerce transactions such as these form a huge amount of very successful online advertising activities from Meta. Susan Li, Chief Financial Officer of Meta, said this year in a profit call that online commerce advertisements made the “biggest contribution to the growth of the year on an annual basis” to the advertising income of the company.

    The effect of rates on Meta's advertising company is easy. Many of his small and medium -sized advertisers are from all over the world. President Trump's rates will immediately make it more expensive for them to sell their products to customers in the United States.

    That will probably lead to a pullback in general purchases from consumers and fewer people who buy products from Facebook and Instagram. That in turn could lead to brands spending less on advertisements in those apps.

    Meta has extra complicating factors that can influence its company more than other advertising companies.

    Last year the company revealed that 10 percent of its turnover in 2023 was from Chinese companies that strongly spend on advertisements on Facebook and Instagram, an advertisement -Blitz aimed at collecting a foot on the ground in lucrative Western markets.

    Much of that growth was fed by the explosive expansion of the fast-fashion company Shein-Dat is located in Singapore but has a supply chain that is largely in China-and the e-commerce app Temu, a cheap, Amazon-like company that is owned by the Chinese e-commerce conglomaat peanutouco. According to Bernstein Research estimates, Temu would have spent $ 3 billion in marketing costs in 2023 alone.

    Chinese companies and goods have been hit hard by the rates of President Trump. In addition, Mr. Trump eliminated the 'The Minimis exemption', who had exempted exporters those goods with a value of or less than $ 800 to have to pay tasks. The exemption was essential for the Temu and the business model of selling cheap goods to Americans.

    If the rates of Mr. Trump lingers, they can drastically harm these exporters of cheap Chinese goods, which means that they can lower their advertisements on Facebook and Instagram.

    In an investor call last year, Mrs. Li defended the exposure of the company to every fluctuation in expenditure by Temu and Shein.

    She said that two-thirds of Meta's Chinese advertising income came from advertisers “outside the top 10 spending in that country in 2023.” Her point is: even if Temu and Shein withdrew, many other Chinese advertisers still bought Facebook and Instagram advertisements.

    Unfortunately for Meta, that broad basis of advertisers is not a hedge at Mr. Trump, who will influence all Chinese advertisements.

    “Because their Chinese advertisements are so evenly distributed, it is actually worse for them,” said Eric Seufert, an independent mobile advertisement analyst who follows Meta. “They don't just have to worry about Temu or Shein. They have to worry about everyone.”

    Meta did not respond to requests for comments.

    To be honest, Meta is not alone. E-commerce technology companies such as Shopify and Stripe can be confronted if the worldwide trade slows down. Google and Amazon also have huge advertising companies that can be impeded by a withdrawal of the expenditure of Chinese companies.

    We will hear Meta's defense soon enough. The company is expected to answer the questions of investors when it reports a quarterly profit this month.