Finished TVs From China Spared From New Tariffs, but LCD Panels Take Hit

Of the roughly half-dozen product codes listed in the notice under the Harmonized Tariff Schedule’s 8528.72.00 family of classifications for finished TVs from China, virtually all are of the non-HD variety and have built-in legacy CRT screens. Shipments of those products to the U.S. were minuscule last year from most countries of origin, including China, said Bob O’Brien, president of Display Supply Chain Consultants (DSCC), citing International Trade Commission data.

The proposed list deals a potential blow to Element Electronics and any other entity with ambitions to assemble LCD TVs in the U.S. using flat-panels sourced from China. The USTR’s office added two classifications of flat-panels (HTS 8529.90.54 and 9013.80.90) to the target list for the first time in this, its third round of tariffs.

Element fought hard in mid-May hearings on the first round of tariffs to keep flat panels from China off the list and finished TVs on (see 1805150069), but it lost on both counts with the release of the new list and the USTR office’s decision to exclude finished TVs from the tariffs it announced June 15 (see 1806150030). “We see no possibility that Element could continue to assemble TVs in South Carolina if the 25% duty is imposed on LCD panels,” the company told the USTR’s office in May 22 post-hearing comments. Element is “currently studying this issue with our advisors" and won't "have any comment at this point,” General Counsel David Baer emailed us Wednesday.

O’Brien also thinks Foxconn “is a complete loser in this,” until it gets its LCD fab “up and running” in Wisconsin, which won’t be for another two to three years, he said. “Their plan, as I understood it, was that they were going to start by building TVs with imported panels” from China, he said. “This throws a wrench in that,” though it’s possible Foxconn “could source panels from Taiwan or Japan," he said. Foxconn representatives didn’t comment.

In compiling the list of 6,031 HTS subheadings newly targeted for tariffs, the “selection process took account of likely impacts on U.S. consumers, and involved the removal of subheadings identified by analysts as likely to cause disruptions to the U.S. economy, as well as tariff lines subject to legal or administrative constraints,” said the USTR’s notice. DSCC’s O’Brien nevertheless was “shocked” that consumer TVs weren't on the list, he told us Wednesday. “If you’re going come up with a list of $200 billion, you need some things with a lot of dollars, and TVs have a lot of dollars.”

O’Brien also was surprised TVs were left off the list because he can make the argument that 10 percent tariffs can be imposed on TVs “without really having any consumer impact,” he said. TV prices “really are going to go down anyway with the huge decreases in panel prices,” he said. “The prices are going to go down on TVs in the fall of 2018 compared with the fall of 2017. You could slap a 10 percent duty on China, and prices would still be going down.”

China views the administration’s latest tariffs threat as “quintessential trade bullying,” said a Foreign Ministry spokeswoman Wednesday. “We will take necessary countermeasures to safeguard our legitimate and legal rights and interests.” Asked at a news conference if it’s possible in the current hostile environment for China and the U.S. to restart trade talks, she said: “Though a trade war is the last thing we want, we are in no way afraid of fighting one. The Chinese side will take resolute and forceful measures in a timely manner to safeguard its own legitimate and legal rights and interests and uphold the multilateral trading system and rules.”

More tariffs will mean "more pain" for small businesses and consumers, said CTA President Gary Shapiro. "A trade negotiating plan based on mutually-assured destruction with American businesses and jobs in the crosshairs isn't a winning strategy," he said. "Escalation of tariffs and counter-tariffs on parts imported from China will hurt small businesses that assemble and manufacture in the U.S. and also raise prices for American consumers."

The National Retail Federation fears the latest round of proposed tariffs will “boomerang back to harm U.S. families and workers,” said David French, senior vice president-government relations. “Tariffs on such a broad scope of products make it inconceivable that American consumers will dodge this tax increase as prices of everyday products will be forced to rise.”

Any “retaliation” from China that will follow “will destroy thousands of U.S. jobs and hurt farmers, local businesses and entire communities,” said French. The Trump administration “has been pursuing tariffs now for months and we still don’t know what the endgame is,” he said, urging the administration to “get back to the negotiating table with China while working through a global coalition” that shares U.S. concerns about allegedly unfair Chinese trade practices.

U.S. retailers “and the families we serve barely had time to process the barrage of tariffs implemented last week,” said Hun Quach, vice president-international trade at the Retail Industry Leaders Association, which represents big-box retailers. “Now, we will need to grapple with new tariffs on an additional $200 billion worth of imports, which are bound to include even more consumer products and everyday essentials.” RILA fears for those “left in the crosshairs of an escalating global trade war,” including consumers, businesses and “American jobs dependent on trade,” said Quach.

The administration is imposing more tariffs “without a clear objective or end in sight, threatening American jobs, stifling economic investment, and increasing the prices of everyday goods,” said Information Technology Industry Council CEO Dean Garfield. The U.S. has “the potential to cement lasting change in China’s unfair trade practices and policies -- and it would be a shame to squander it,” he said. “We urge President Trump to delay this unnecessary escalation before more consumers and workers are harmed and instead make a concerted effort to build a coalition while he is in Europe this week and then negotiate with China to achieve tangible commitments including accountability mechanisms and implementation timelines.”

CompTIA fears that “very few Americans will be unaffected” by the proposed new tariffs, said Elizabeth Hyman, executive vice president-public advocacy. Despite the USTR’s commitment to not target consumer goods, the proposed tariffs “will increase the price of products used every day in our homes and offices,” including Bluetooth speakers, smartwatches and other technology products, she said.

The Telecommunications Industry Association is upset that the new tariff list “includes routers, switches and other telecom goods which are essential components of today’s high-speed networks,” said Cinnamon Rogers, senior vice president-government affairs. Imposing 10 percent tariffs on these items “will inflate the cost of internet access for American business and consumers and pose a needless burden on the U.S. economy,” she said.

“So much advocacy before the @FCC is about avoiding policies that can impose costs on facilities that will slow down #broadband infrastructure deployment,” tweeted Commissioner Jessica Rosenworcel. “But starting a trade war with #China imposes real costs on both businesses and consumers. And yet, on this is issue, silence.”