Trump's China tariffs could make your new TV costlier
Corporate America is busy testifying this week before the Office of the U.S. Trade Representative in an effort to avoid President Donald Trump's proposed tariffs on at least $50 billion in goods from China. At the same time, Chinese and U.S. negotiators are seeking to prevent a trade war between the world's two biggest economies.
One place the tariffs might hit home if approved: the TV in your living room. That's because many of them are imported from, or have parts made in, China.
An industry study prepared for the National Retail Federation and the Consumer Technology Association found proposed tariffs would increase prices on TVs from China by 23 percent and all TVs by 4 percent, according to written testimony prepared for the hearings.
"Televisions are low-margin items, especially so in the sub-$1,000 market, so any artificial increase in their cost will most likely be passed on to consumers," an April report from S&P Global Market Intelligence said.
The lower end of the market will be most hurt, but brands like Samsung and LG, able to command a premium, "should be able to absorb a higher portion of the tariff cost on their higher-margin premium sets," S&P wrote.
U.S. sales of potentially affected TVs "amounted to $3.9 billion in 2017 and made up 35 percent of the value of all TVs imported under this code," the CTA said in testimony prepared for this week's hearings.
Best Buy (BBY), for one, wants TVs to be spared.
In written testimony this week by Mike Mohan, Best Buy's chief merchandizing and marketing officer, he said Best Buy supports the administration's efforts to stem what it called "unfair trade practices" including China's mandates that foreign companies transfer technology to Chinese subsidiaries when locating there. But flat panel TVs aren't advanced enough to be included, he added.
"Notably, flat panel televisions are not among the list of advanced, 'leapfrog' technologies that are targeted by the Chinese government policies," Mohan said. "Foreign investment and development of the industry generally has taken place free of restrictions and compulsory technology transfer policies. In fact, major Japanese, Korean and Taiwanese companies have wholly owned subsidiaries in China that develop and produce flat panel TVs."
Top brands most affected, mainly because of shipments directly from China, would likely be TCL, LG and Vizio. Brands like RCA, Haier and Insignia, which use original equipment design manufacturers for production, would also look for alternatives to manufacturing in China should the tariffs be imposed, S&P said.
Bigger brands, like Sony (SNE) and Hisense could be hurt "to a much lesser degree" because most of their TVs for the U.S. market are produced in Mexico, S&P noted.
The USTR hearings, which aren't televised and conclude today, include testimony from about 130 companies and industry groups. Mr. Trump earlier this year asked the Treasury Department to offer tariff recommendations by May 21.
As the hearings continued, Chinese Vice Premier Liu He traveled Washington to seek a resolution to the larger trade dispute. A similar high-level U.S. delegation made a trip to Beijing earlier in May and returned empty-handed.
Mr. Trump on Sunday raised hopes for the latest talks by striking a surprisingly conciliatory tone toward China, which he has long accused of predatory business practices that rob American jobs and swell Washington's trade deficit with Beijing.
The U.S. president offered a lifeline to ZTE, a Chinese telecom company that's fighting for survival after being hit with sanctions recently by the U.S. Commerce Department.
Mr. Trump tweeted Sunday that he was working with President Xi Jinping to put ZTE "back in business, fast" and save tens of thousands of Chinese jobs -- a stance that drew an immediate outcry from many Republicans and Democrats.
Even as the two sides meet, signs are emerging that tariffs and their countermeasures, proposed or imposed, already are hitting several U.S. industries, some in areas of the country that voted for Mr. Trump in the 2016 election.
If the tariffs go through, higher prices may last through the all-important holiday shopping season, putting TVs potentially out of reach for some consumers.
"In the end, we believe that the price increases potentially seen during the fourth quarter could last anywhere from six months to a year as manufacturers adapt to the new market conditions," the S&P analysts wrote.
-- The Associated Press contributed to this report