The Tariffs are Coming
The impacts of the U.S.-China trade war on one industry sector
In April 2018, the U.S. government proposed a list of 1,300 Chinese exports and expressed intentions to impose 25 percent tariffs on these products, following the Section 301 investigation. In July, the Trump administration released its plan featuring additional tariffs enforcement on U.S. $200 billion worth of Chinese goods. As LED lighting products are included in both tariff lists, ASG Energy has followed the impacts of the tariffs on LED lighting.
The first tranche of tariff went into effect July 6. The LED products included in the first list are mainly intermediate goods such as wafers and backlight products. The tariff would influence U.S.-based companies that have factories in the states and has to buy the intermediate products from China for manufacturing. Lighting products are mainly end-products and the impacts on the prices of LED lighting products are not yet noticeable.
The additional tariffs announced by the Trump administration in July 2018 will influence a wider range of LEDs as the list included more than 10 categories of LED lighting products. These products account for 75 percent of the Chinese lighting exports and the exported goods of the listed lighting products from China to the U.S. were worth more than U.S. $ 5 billion in 2017. Further details regarding the additional tariff enforcement have not been disclosed yet; however, because the U.S. has been an important export market for China made LED lighting products, the impacts of tariff on lighting products will be unavoidable.
Currently, more than 85 percent of LED lighting products are manufactured and assembled in China. Though many LED lighting companies have facilities outside of China, the capacities will not be enough for the demands in the U.S. market. Therefore, the extra cost of tariffs will probably result in higher prices for U.S. consumers.
In the long term, LED producers that own capacities in Taiwan or Southeast Asia may be benefited as the orders could be transferred there to avoid the tariff. Mexico may be another place to provide capacities for the U.S.
For non-Chinese LED manufacturers, they might continue to face low price competition as Chinese companies might sell less lighting products to the U.S. and turn the remaining products to other non-U.S. markets with even lower prices which will bring impacts on the prices of LED lighting products.
The LED lighting industry will experience pricing increases for all manufacturers and suppliers in 2019 which will adversely impact the paybacks of conversions from traditional lighting to LED. ASG Energy recommends customers execute contracts immediately for 2019 in an attempt to secure 2018 pricing by the major suppliers.
About ASG Energy LLC
ASG Energy LLC is a comprehensive LED energy solutions provider, with a successful track record of managing energy reduction initiatives and installations for several Fortune 500 companies throughout the U.S. ASG Energy’s reach extends nationally to serve its customers and operates out of Denver and Canon City, Colorado as well as San Antonio, Texas. ASG utilizes professional project managers and engineers for all our commercial and industrial customers, medical centers and schools to assist our clients in realizing rapid cost savings, as well as, reducing greenhouse gas emissions and improving facility lighting and safety. For additional information please visit www.asgenergyllc.com or email at firstname.lastname@example.org.