Apr. 10 (NBD) -- The Trump administration said last Wednesday that it will place a 25 percent tariff on Chinese products such as flat-screen televisions, medical devices, aircraft parts and batteries, outlining more than 1,300 imported goods that will soon face levies as part of a sweeping trade measure targeting China.
In response, China's TCL Corporation (TCL), the world's third largest TV manufacturer, said Monday it plans to increase production capacity in Mexico to offset the impact.
In fact, even if the U.S. imposes the additional tariff, it would have limited impact on China's household appliance industry. According to the China Household Electrical Appliances Association, TV components affected by the country's new measure account for less than 5 percent of the total export revenue of China's household appliance industry.
TCL to expand capacity of its Mexico plant
TCL said the U.S. is one of its important export markets and its colored TV exports to the U.S. might be affected by the new decision of the U.S. to some degree. But as TVs exported from Mexico to U.S are free of duty, TCL will shift some of its TV production to Mexico and at the same time take other measures to offset the tariff impact.
Peng Yuhan, a sensor analyst of the global TV industry at consulting firm Sigmaintell, said most of TV makers have plants in Mexico, which can help offset tax impacts. However, the TV supply chain might be impacted, sending the cost of a complete set of TV higher. Meanwhile, as only a few TV makers have complete production line in the U.S., the interest of the U.S. consumers will be hurt in the end.
TCL said other products produced by the company such as display panels, mobile terminals, household appliances, and smart AV systems haven't been directly affected for the time being.
TCL has sales units in over 80 countries and regions, and has manufacturing sites in Mexico, Poland, and Southeast Asia outside of China.
Impact on China's home appliance industry limited
According to a research report released by GF Securities, household appliances that will be affected by the proposed tariffs are actually limited. And most of them are spare parts or used for commercial purposes.
China is a major exporter of household appliances, but relies little on the U.S. market.
For most listed white goods giants, revenue from the U.S. take up less than 5 percent of their total; while for brown goods makers such as TCL and Hisense, about 10 percent of their revenue come from the U.S. market. To OEMs like Lexy and Xinbao, the proportion is 20-30 percent, citing TF Securities.
According to Minsheng Securities, the U.S. demand for household appliance accounts for 18 percent of the global consumption, second to China, but its production capacity only takes up 2 percent of the global total.
As of last November, the U.S. has accumulatively imported 18.58 billion U.S. dollars worth of air conditioners, refrigerators, and washing machines, 26 percent of which were contributed to China.
NBD noticed that many domestic household appliance makers have plants or offices in the U.S. and Mexico, which can help minimize the impact of the proposed tariffs.