President Trump and the Chinese government are doubling down on their heated trade dispute. The world's two largest economies are threatening to impose tariffs on a broad range of each other's imported goods in a way that experts say could ultimately hit consumers' wallets.
One popular product that may face a tariff: TVs. The Trump administration's proposal would slap a 25 percent tariff on them if they are imported to the United States from China. Here's a look at why flat-screen TVs are on the White House's tariff list and how their prices could be affected if the two sides don't agree on a trade deal.
Why are TVs being targeted?
The Trump administration says that China has stolen intellectual property from American companies and also forced U.S. firms to share their technology with Chinese partners. The costly levies are designed to push China to abandon these practices.
One way to do that is by targeting TVs, which are not an essential, as are clothes or phones, but which still represent billions of dollars in imports and would hurt Chinese producers. Of the 41.5 million TVs exported to the United States last year, about 47 percent were imported from China, according to Bob O'Brien, president of Display Supply Chain Consultants, a market research firm in the display industries. Big-name brands, such as Japan's Sony and Korea-based Samsung and LG, work with Chinese manufacturers or have subsidiaries in China where TVs are assembled and then shipped to the United States. In a blog post this week, O'Brien said the value of TVs imported from China last year totaled about $4 billion, which would be subject to Trump's tariff. So, TV makers who export their products from China to the United States would have to pay $1 billion.
“The goals of these retaliation lists is to maximize economic pain on the other country and minimize the pain for your own country,” said Edward Alden, a senior fellow at the Council on Foreign Relations and author of “Failure to Adjust: How Americans Got Left Behind in the Global Economy.” “TVs fit that pretty well, because there are alternative sources of supply,” Alden said referring to countries such as Mexico, which is another major TV provider to the United States.
Would the TV tariffs cause prices to rise?
“If you put a 25 percent tariff on those TVs, that's a billion dollars' worth of tariffs that eventually goes through to be paid by consumers,” O'Brien said.
Last year, the average cost of a 55-inch TV in North America was $559, according to Paul Gagnon, an analyst with data firm IHS Markit. If the full cost of the tariffs is passed on to consumers, people looking to purchase a new TV would pay about $140 more.
But there's also the possibility that TV manufacturers could avoid the full cost of the levy, O'Brien said. Companies could start assembling more of their TVs in Mexico, which already accounts for 44 percent of American TV imports, which are duty-free under NAFTA rules. Manufacturers could also build production plants in the United States.
In those cases, consumers may not absorb the full effects of the tariffs.
Is the existing trade deal the reason TV prices are low now?
Compared with last year's $559 average cost for a 55-inch set in the United States, that same size TV would have cost $1,240 in 2012, Gagnon said. TV prices have fallen because of intense competition, boosted manufacturing capacity and huge economies of scale, experts said.
Mainstream TVs made in high volume are notoriously low-margin products. That makes it harder for companies to turn profits on popular TV models and puts pressure on them to base their operations where manufacturing costs are lowest. “TV makers produce TVs in whatever major region provides a cost advantage,” Gagnon said.
In many cases, that region is China, where there is frequently government support for investment in manufacturing, O'Brien said. “The Trump administration is targeting segments that are part of the Chinese government's Made in China 2025 policy, and one of the industries supported by that policy is the flat-panel display industry, which directly feeds into TV manufacturing,” he said.
How do the American TV manufacturing companies feel about this?
No American manufacturer assembles entire TV sets in the United States, experts said.
Are other consumer electronics affected?
Parts that make up many consumer electronics, such as “smart” refrigerators, thermostats and coffee makers, are also included on the tariff list. “As proposed, it will certainly raise the cost of manufacturing of consumer technology devices, and it's certainly possible that will hit consumers in the pocket book,” said Jack Cutts, senior director of business intelligence and research at the Consumer Technology Association, an industry trade group.
How are foreign TV manufacturers responding?
It's not immediately clear. Sony declined to comment. Samsung, LG and Vizio did not respond to requests for comments.