In April 2018, the US government issued a list of tariffs on 1,300 Chinese products. The US trade representative suggested an additional 25% tariff on Chinese products on the list. On July 10, the Office of the US Trade Representative issued a statement that the Trump administration issued a plan to increase tariffs on China's $200 billion in goods. In the above two tariff lives, LED products are impressive.
The first round of US tariff measures on Chinese exports to the United States was launched on July 6. According to related news, the LED products included in the first list are mainly intermediate products including wafers and backlight products. For US companies whose factories are set up in the United States but must purchase intermediate products from China for manufacturing, this tariff will undoubtedly cause great losses to them. Lighting products are mainly terminal products, and the impact on the price of LED lighting products is not obvious.
The LED products covered by the Trump administration's taxation project in July covered a wide range of products, including more than a dozen items in the LED lighting category. These products account for 75% of China's total exports of lighting products. In 2017, China's exports to the United States, the main lighting products, reached more than US$5 billion. Further details on the enforcement of additional tariffs have not yet been announced, but since the United States has always been an important export market for LED lighting products in China, the impact of tariffs on lighting products will be inevitable.
For US-based LED giant Cree, the company is now announcing ways to reduce the impact of tariffs. At the same time, the company expects its earnings per share to fall 2% in FY 2019 due to tariff measures. Eaton, another US-based lighting company, said it will produce and sell related products in the same region and will take pricing measures to offset the impact of tariffs on the business.
Currently, more than 85% of LED lighting products are manufactured and assembled in China. Although many LED lighting companies have production facilities outside of China, their output is not enough to meet the needs of the US market. Therefore, the additional cost of this tariff may be reflected in the form of higher fees for US consumers.
In the long run, LED manufacturers with capacity in Taiwan or Southeast Asia may benefit because they can transfer orders to where to avoid tariffs. For those non-Chinese LED manufacturers, as Chinese companies sell lighting products to the US will gradually reduce and shift the rest of the products to other non-US markets, they may continue to face low-price competition, while lower prices will be for LEDs. The price of lighting products has a serious impact.