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While President Donald Trump has paused “reciprocal” tariffs on most countries, leaving just the new 10% baseline import duty, he increased the tariffs on China to 125%. The country had already been slapped with a 20% tariff, so Chinese imports now attract a 145% levy.
That’s a humongous sum, and one need not be an economic wizard to predict that these tariffs will severely impact trade between the world’s two largest economies. Trade won’t come to a halt as U.S. buyers won’t be able to overnight find other suppliers — either domestically or internationally — but they will start sourcing from other countries wherever that’s feasible.
Companies like Apple (AAPL) read the writing on the wall and started diversifying away from China over the last couple of years. However, the iPhone maker still relies heavily on China and is among the worst affected by the mammoth tariffs.
Looking at other “Magnificent 7” peers Meta Platforms (META) may seem immune from the tariffs as firstly it is a services company, unlike Apple, which sources goods from China. Secondly, Meta Platforms’ applications including Facebook, WhatsApp, and Instagram are banned in China.
However, Trump’s tariffs could potentially kill a key pillar of Meta’s growth.
To add to that, the recent whistleblower allegation of the company briefing China about U.S. artificial intelligence (AI) initiatives and thereby undermining U.S. national security is only adding to the gloom around Meta stock.
How Much Revenue Does Meta Platforms Get from China?
While Meta is banned in China, Chinese companies use its platforms to reach potential buyers, particularly in the Western world. Chinese advertisers reaching out to U.S. consumers has been a key driver of Meta’s growth over the last couple of years.
While Meta does not provide the breakdown of spending by Chinese advertisers, in 2024 it earned $18.35 billion in revenues from China. This represented 11% of its total revenues last year. Its revenues from China have increased significantly over the last two years, as it earned $13.69 billion and $7.40 billion in 2023 and 2022 from China, respectively.
In its 2024 annual report, Meta warned, “We generate meaningful revenue from a small number of resellers serving advertisers based in China, and it is possible that the Chinese, United States, or other government could take action that reduces or eliminates our China-based advertising revenue.” As Chinese advertisers slash their spending on Meta in response to the 145% tariffs, the company's China business will take a hit.
Meta Stock Forecast
Meta has been the best-performing Magnificent 7 stock for most of this year – a position it still holds with a YTD drawdown of just 6.95% as of April 11. Meta was incidentally the last member of the coveted group to turn red for the year.
However, since Trump announced the reciprocal tariffs on the April 2 “Liberation Day,” multiple brokerages including Piper Sandler, KeyCorp, Bank of America, JPMorgan, Jefferies, and Guggenheim have slashed Meta’s target price while maintaining their “Buy” or equivalent ratings.
Piper Sandler, which is the latest firm to slash Meta’s target price by $165 to $610, cut the company’s 2025 and 2026 revenue estimates by 2% and 4% respectively due to the expected hit in the China business as well as the projected slowdown in e-commerce sales which is another key revenue source for Meta.
Despite the recent target price cuts, Meta currently has a mean target price of $733.55 which is 37% higher than the current price. Of the 54 analysts covering Meta stock, 46 rate it as a “Strong Buy” and two as a “Moderate Buy.” Four analysts rate Meta as a “Hold” while the remaining two rate it a “Strong Sell.”
Should You Buy or Sell Meta Stock Now?
While tariffs on China are expected to hit Meta’s revenues from Chinese advertisers, the slowing U.S. economy is not helping the digital advertising giant’s cause either. Moreover, in her testimony before the Senate Judiciary Committee, former Facebook executive Sarah Wynn-Williams alleged that Meta executives "lied about what they were doing with the Chinese Communist Party” to grow their business in that country.
Allegations of Meta discussing U.S. AI efforts with China will only dampen investor sentiment at a time when tariff uncertainty is already spooking investors.
From a valuation perspective, Meta now trades at a forward price-earnings (P/E) multiple of just over 23x while the P/E-to-growth (PEG) multiple is at 1.26x. While the multiples don’t look demanding, they might not be fully baking in the increased risks.
Overall, while I will continue to hold my Meta shares, I am wary of adding to the position just yet and will wait for better prices.
