Trump’s Tariffs To Tax TVs
U.S. President Donald Trump stepped up his pressure on Chinese trade negotiators Monday by announcing a proposed escalation of tariffs on an additional $300 billion worth of Chinese imports, which this time encompasses a greater list of consumer electronics products including China-made televisions sets.
The declaration came when trade negotiations with China appeared to be nearing a comprehensive commercial deal. That was before Trump announced he was raising tariffs to 25% on a previous round of products due to what he saw as delays by China for attempting to renegotiate previously agreed-to conditions.
In retaliation, the Chinese government announced plans to impose tariffs on $60 billion worth of American products. When added to previous measures, the round of tariff proposals announced Monday would cover a total of $540 billion in Chinese imports.
Trumps’ action didn’t help the downward sliding Dow Jones Stock Exchange Monday, as investors apparently began showing concern over how all of the “taxes” would impact corporations dependent on both sales to China and products and components acquired from Chinese suppliers.
Is this all a negotiating ploy by the President? Possibly. Treasury Secretary Steven Mnuchin announced Monday that the two sides remained in “ongoing” negotiations, and the President said he would meet Chinese President Xi Jinping at the G20 leaders summit in Osaka, Japan, on June 28-29.
But if not just a threat, the newest expansion would open up tariffs to a wide range of products U.S. consumers typically purchase from major discount stores like Walmart, Target, etc. and big box CE retail chains like Best Buy. Most noteworthy to this audience are China-made televisions that typically present the highest value prices and entry positions in manufacturers’ model lines. These represent a good chunk of market where the mainstream business is transacted in any given year.
Higher-end, higher-performing 4K and 8K televisions largely come from South Korea or Mexico and won’t be exposed, but some fallout is still likely to impact televisions overall. Higher prices could have a big impact on key promotional sales periods like Black Friday, if the measures remain in place.
As we have previously reported here, some China TV manufacturers like Hisense and TCL have started assembling televisions in Mexico. These can be imported into the United States to avoid tariffs through NFTA regulations (at least for now). But a good portion of the most aggressively priced television models — like those sold under private label brands like Insignia or licensed brands like Westinghouse, JVC and others — would be more impacted.
According to some estimates, as much as 50% of the television units sold in the United States come from China. Margins on such products are so low that it’s unlikely manufacturers will absorb these added costs for long before passing them on to consumers.
A study commissioned by the Consumer Technology Association (CTA) and the National Retail Federation last year indicated the proposed tariffs could increase prices on TVs from China by 23% and prices for all TVs by 4%.
Some good news remains, however. Paul Gagnon executive director of television market analysis for market research firm IHS, said that “after almost a year of tariffs and threats of tariffs, TV brands have undertaken a lot of work to mitigate the impact and prepare alternate plans, including more production in Mexico and building new assembly factories in SE Asia that could be used for U.S. TV imports in addition to serving the broader Asia Pacific region.”
He said some savvy U.S. electronics retailers ordered supplies of mostly under 50-inch TVs, which typically come from China, in heavier quantities late last year.
That should cover at least some of the potential shortfall as manufacturers from other regions like South Korea, Taiwan, Malaysia, and other Asia Pacific countries slowly begin to take on the demand.
Speaking out against the tariffs, Gary Shapiro, president and CEO, Consumer Technology Association (CTA), said of the U.S. Trade Representative’s proposed tariffs on an additional $300 billion worth of Chinese imports: “The Trump Administration has now formally proposed an excise tax or tariff on consumers’ favorite technology products – including smartphones, laptops, TVs, wireless headphones and smart speakers. In all, tech products account for more than half of the $300 billion in products on the new tariff list.
“This immense round of tariffs is exponentially worse for our country. China is one of the top export markets for American technology – and its retaliatory tariffs will choke U.S. job creation and global sales for American manufacturers and innovators,” he continued.
“President Trump is right to oppose China’s bad trade practices. But National Economic Council Director Larry Kudlow has acknowledged what we’ve said all along – tariffs are taxes paid by Americans, not China. Raising tariffs in this questionably legal fashion hurts American families, workers and businesses,” Shapiro said.
By Greg Tarr
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