“As a result of the trade situation, we will be initiating pricing actions, which will be sent under separate cover shortly,” Thomas Yoon, LG executive vice president, said in a memo to the company’s retail partners.
The company plans to start producing washing machines at a new factory in Clarksville, Tenn., by the end of this year. Creating a U.S. production line would allow it to avoid the import fees.
The dispute over washing machines first flared up in 2012 when Whirlpool asked the Commerce Department to impose tariffs on large residential washing machines from Korea and Mexico, where LG operated production lines. Whirlpool successfully argued that LG has been “dumping” lower-cost washing machines in the United States with the help of unfair government subsidies, and the United States agreed to impose new tariffs.
But Whirlpool continued to press its case, saying the tariffs proved insufficient as LG moved production lines around the world to avoid various import duties. Whirlpool sought protection under a U.S. “safeguard” law that allows tariffs to be imposed regardless of their country of origin.
Such cases are unique in that they require a direct sign-off from the president. On Tuesday, President Trump decided in Whirlpool’s favor, imposing steep import duties that will apply to foreign manufacturers of front-loading and top-loading washing machines. The first 1.2 million washing machines imported each year will be subject to a 20 percent tariff, with any additional units facing a 50 percent tax.
South Korean officials said this week they would seek to overturn the decision by appealing to the World Trade Organization. The dispute comes at a sensitive time for two nations that are attempting to work together to deal with a growing nuclear weapon threat from North Korea.
LG’s decision to increase prices seemed to confirm some economists’ predictions that new trade barriers would ultimately result in higher prices for consumers, as manufacturers increase prices to compensate for the extra cost associated with having to pay the import tax.
“Hopefully this was communicated to President Trump before he made the decision, but this is not a surprise at all and we should expect to see more of this,” said Chad Bown, a fellow with the Peterson Institute for International Economics, a think tank. “Every time President Trump imposes a tariff or a quota or some kind of import barrier, the result of that is going to be higher prices for American consumer.”
Trump’s decision comes as a growing number of companies are appealing to the administration for help against competitors. The Commerce Department initiated 79 new tariff investigations in 2017 at the request of U.S. companies, reflecting a 65 percent jump over the previous year. The Commerce Department has also moved to bring more tariff actions on its own.
LG has argued that import taxes will ultimately result in higher prices across the board, as U.S. companies find themselves shielded from price competition.
“From the outset, we raised concerns that import restrictions would result in industry-wide higher prices and fewer choices for consumers,” an LG representative said Wednesday.
Whirlpool has argued that tariffs are needed to ensure manufacturers follow U.S. trade laws, and that closer enforcement of existing laws should do little to chip away at affordability.
“This case is about enforcing trade laws that ensure fair competition among appliance companies and providing real benefits to consumers,” a Whirlpool representative said in an email Wednesday. “An effective remedy will bring a variety of washer choices at affordable prices.”