Best Buy is taking multiple steps to counter effects of tariffs, Chief Financial Officer Matt Bilunas said on a Nov. 26 earnings call. He said the retailer is bringing in products ahead of tariff implementation; making strategic decisions on vendor and SKU assortment; instituting promotional and pricing strategies and sourcing changes; and developing strategies with vendor partners. The most relevant tariffed categories for Best Buy for Section 301 List 4A products are TVs, headphones and smartwatches; and for List 4B products are computers, mobile phones and game consoles, Bilunas said.
IRobot started making some models of its Roomba vacuum line in Malaysia as part of an effort to shift away from China, the company said in a Nov. 21 news release. “Establishing manufacturing operations in Malaysia is a fundamental component in our initiative to diversify iRobot's manufacturing and supply chain capabilities, while also mitigating our exposure to current and prospective tariffs on products that are imported from China," said Colin Angle, CEO at iRobot. The company previously announced the plans to begin a production line in Malaysia (see 1910230027).
Consumer electronics company Sonos forecasts a $30 million blow to fiscal year 2020 profits, resulting from the 15 percent Section 301 List 4A tariffs that took effect Sept. 1, Chief Financial Officer Brittany Bagley said on a Q4 call Nov. 21. Most of the impact will be in the holiday quarter, she said. Citing “frequent speculation” about trade negotiations, Bagley said, “We are assuming for the purposes of this call that this remains in effect for the full year at 15 percent.” To mitigate tariff exposure, the company is diversifying its supply chain out of China and has accelerated production of U.S.-bound products in Malaysia. That capacity is “ramping up quickly, and we believe we will have largely eliminated the go-forward impact of tariffs by the end of the fiscal year,” Bagley said.
An economics working paper found that importers are paying nearly as much for Chinese goods hit by tariffs as they did before Section 201 and 301 tariffs, which means Chinese companies are not the ones bearing the burden, contrary to President Donald Trump's claims. The Harvard University, University of Chicago and Federal Reserve Bank economists said they documented “that the tariffs were almost fully passed through to total prices paid by importers," but that doesn't mean Chinese companies aren't harmed, too. The tariffs would likely reduce the volume of U.S. purchases, even if Chinese companies are able to maintain their profit margins, they said.
Countries frequently used to hide the origin of goods from China before import in the U.S. seem to be making strides in preventing transshipment, Sidley Austin lawyer Ted Murphy said in a blog post. Murphy highlights one recent story in which Vietnam Customs "seized $4.3 billion worth of Chinese-origin aluminum that had been relabeled as Vietnam-origin and destined for" the U.S. "The story also mentions recent seizures of bicycles, machinery, clothes, shoes and electronics that were falsely labeled as being of Vietnam origin after being transshipped from China, through Vietnam, to the United States."
Imports at major U.S. retail container ports this month are expected to see their “final surge” of 2019 ahead of the 15 percent List 4B Section 301 tariffs set to take effect Dec. 15 in Chinese goods, the National Retail Federation said. “Retailers are encouraged by reports that China and the United States have agreed to remove at least some of the existing tariffs once a ‘phase one’ deal is signed,” NRF said. “We are eager to see concrete evidence that the trade war is coming to an end with a final deal that removes all tariffs.” There is “no word” from the Trump administration on the fate of the List 4B tariffs still set for December, it said. “Industry planning is in a state of confusion with the on-again, off-again tariff increases and the widening of trade disputes.”
Fewer than one in three of the 3.9 million finished TV sets the U.S. imported from all countries in September originated in China, according to Census Bureau statistics released Nov. 7 through the International Trade Commission’s DataWeb tool. That nearly two-thirds of TV unit shipments in the month were sourced from Mexico showed the unmistakable measures U.S. importers took to eliminate exposure to the 15 percent List 4A Section 301 tariffs that took effect Sept. 1 on finished sets from China.
One panelist said it will take 20 years to know who are the winners and losers of today's tariffs and export restrictions. Another panelist said U.S. factory workers making washing machines and solar panels are clearly winning from the safeguards launched nearly two years ago, as are Vietnam and Mexico. Another panelist said Vietnam and Thailand, and Mexico to a much lesser degree. As moderator Lucas Queiroz Piers said, “It is a confusing moment." The Alston & Bird legal consultant was coordinating a panel called "U.S. Sanctions and Trade War: Winners and Losers," at an American University Washington School of Law International Trade Symposium on Nov. 5.
Apple CEO Tim Cook downplayed the impact of a potential hit from tariffs slated for Dec. 15 on smartphones and other devices during the company’s fiscal Q4 earnings call on Oct. 30 The company was already paying some tariffs prior to September and after Sept. 15 when List 4A Section 301 tariffs took effect. Cook’s view of potential December tariffs is “very positive in terms of how things are going,” he said, saying Apple’s guidance reflects that optimism. The tone of trade talks “has changed significantly, and I have long thought that it was in both countries’ best interests to get to an agreement that maybe initially doesn't solve everything but solves some things that each party may want,” he said: “I'm hopeful that that's where we're headed.”
Timing of List 4B Section 301 tariffs, due to take effect Dec. 15 on smartphones, laptops, tablets and other goods, “could not have been worse" for a consumer tech sector already facing product innovation and demand pressures, Futuresource Consulting blogged. Tech companies need to be agile and resilient as global trade and geopolitical tensions have disrupted technology supply chains that were optimized for long-term cost efficiencies, the researcher said. Companies have to optimize for the disruptions, while using trade uncertainties as an opportunity to create a strategic competitive advantage, it said. Global consumer electronics supply chains are at increased risk of “fracturing” as a result of the U.S.-China trade dispute, said Futuresource, which sees a “short-term fix” as a survival strategy, allowing companies to re-evaluate classification and product routing of key components. Long term, tech firms should consider a “China Plus One” strategy whereby companies active in China augment existing investments with a second facility to diversify risk, cut costs and reduce over-reliance on China. That’s beginning to happen, with some companies announcing they’re transferring production facilities to Vietnam, for example, it said.