TV imports to US now caught up in China trade dispute
Higher tariffs impact TVs
TV NewsIf something doesn’t affect you directly, it’s all too easy to dismiss it as someone else’s problem. Now, however, it’s likely that US TV buyers will be giving the ongoing US-China trade dispute much more attention as a report from IHS Markit says that imported TVs are now firmly in the firing line.Back in May 2019, it was announced that existing tariffs on $200 billion worth of products coming to the US from China would be raised from 10 percent to 25 percent. Then, on 1st Aug 2019, a second round of tariffs was announced on the remaining $300M worth of products imported from China, which includes core US consumer electronics goods such as TVs.
The overarching complexity of the situation has resulted in the 10 per cent tariffs being imposed asymmetrically with some starting on 1st Sep and some on 15th Dec 2019. Unfortunately, it seems that tariffs on TVs will be among those imposed on 1st Sep.
With the tariffs at 10 percent, it is not a clear cut situation as to whether TV manufacturers (and other importers) will absorb the extra costs themselves and take a hit to their bottom line or whether they will pass on the extra costs to the customer and risk a downturn in demand as product prices rise. Each retailer may take a different stance and the profitability of the products will play a major factor in determining which course of action to take.
There is obviously concern about what effect price increases will have over the lucrative ‘Holiday Season’ that includes Thanksgiving, Christmas, New Year as well as firmly established sales events such as Black Friday, and the announced split start could be down to US Government concerns about how price rises will affect retail throughout this period.
With TVs from China’s burgeoning electronics industry proving very popular in the US - TCL recently became the number one shipper of TVs throughout the States - and with 56 percent of imported TVs coming from China in 2018, most retailers will have already been aware of this eventuality and started adjusting inventory orders to keep stocks healthy with pre-tariff products.
In 2018, 41 percent of TVs imported into the US came via Mexico from the factories owned by the South Korean and Chinese TV giants there. So, one possible way around these tariffs would be to bring in products ordered from China using this route instead. However, it’s estimated that the extra cost of assembling TVs from China is about 15% higher in Mexico and when offset against the existing 3.9 percent tariff for Chinese TV imports plus the additional 10 percent to be levied from 1st Sep, there is not enough of a margin to forgo established supply chain efficiencies. Additionally, with the volatile trade situation, tariffs could be changed or removed with short notice, so a long term alternative is difficult to justify at this point.
One consequence of the trade dispute may be a focussing by retailers on ‘Holiday Season’ promotions involving TVs bought in from Mexico. Since these tend to be the larger screen offerings from Samsung and LG, there could be some bargains associated with 55-inch, 65-inch or even larger TVs, with a reduction in promotions for smaller sizes likely due to the poor margins.
Are there any US AVForums members who are looking to upgrade their TV this year with a Chinese brand that may be affected by the trade dispute as it stands? If so let us know in the discussion.
Image Source: Bloomberg
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