Trump administration’s decision to issue tariff on large washing machines (washers) is expected to create a significant influence on industry players as well as consumers. Washer manufacturers importing products outside the US are expected to face a significant price disadvantage as compared to US manufacturers whose production plants are mostly based in the US. There is growing concern outside the washer industry as well on potential tariff on other industries.
In the short-term, price increases and loss of share are inevitable for non-US manufacturers, until the process of local sourcing and production is settled. Korean manufacturers, which have shown rapid growth in the US, will see the most negative impact.
US manufacturers such as Whirlpool Corp will be able to recover share from non-US manufacturers to a certain extent. Consumers will have fewer options available in washers, especially low income households. This will lead to a slow down of the market, as some consumers will not be able to afford the higher prices. The recession in washing machines is likely to be transferred to correlated appliance industries, such as fridge freezers or cookers.
To avoid shrinking profit margins, non-US manufacturers could focus more on middle and high-income households, which are more willing to spend money to save time and make their lives easier, compared with the past. Quality family time, along with leisure, is becoming increasingly important, and products equipped with the technology to address these needs will convince them to pay a premium.
US manufacturers will lose the luxury of having an upper-hand on price-competitiveness fairly quickly, as the shift of production plants by non-US manufacturers is already happening. They will need to improve their product competitiveness in the long run.
The next target appliance industry for potential tariffs, if any, is likely to be refrigeration appliances, in which the recent growth of non-US manufacturers is notable. In response to tariffs on imports to the US, the governments of major economies are considering retaliation tariffs on US imports to their own countries. This could potentially trigger trade wars.In a trade war scenario the global economy will stagnate, as trade transactions shrink and consumer demand contracts.
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