After first round of 25% tariffs on $34 billion worth of products imported from China, the Trump administration imposes another 10% tariffs on $200 billion worth of Chinese goods, both of the tariff lists are including led lighting products, it will be terrible and have big impact on the importers and consumers, because you need to pay more to buy the products now.
Firstly, let’s check what kind of led products are on the tariff list.
In the first round of 25% tariffs, which is already come into effect on 6 July, the following LED products will be affected:
The affected LED products are Light-emitting diodes, backlight LED and some LED related devices, all of these are a kind of raw materials and therefore it will not have a big impact on your lighting business if you are importing mostly end-products. However, to those who also have requirements for led related devices, like LED chips, transistors, you need to pay 25% more to get these items from China.
Although with 25% LED tariffs now, there are 2 ways to avoid it in the short run. One is to produce it locally in the United States, another is importing these items from other areas outside of China.
If produce the LEDs inside of America, due to the limited of equipment, technical expertise, and intellectual property rights, it’s too expensive of manufacturing and packaging in America to attract local manufacturers bring into production. What’s more, as the LED manufacturers were meant to compete with the products imported from China, with the increasing cost on LED devices, the price pressure is bigger.
The second way seems to be a solution, to purchase LEDs from other areas such as South Korea (Soul LEDs), Malaysia, etc. But there is also a challenge on the production capacity for these Non-Chinese suppliers, when in the face of the quick rising of requirements.
In the second round of 10% tariffs, it covers a broad range of LED products, including more than 10 items of LEDs and lighting categories with a higher trading amount, below are the lighting products that will be affected:
From the LED tariffs list we can see that it covers all the lighting products, including the lighting fixtures used for Christmas trees and some other lighting such as chandeliers, ceiling or wall lighting fixtures, fitting, table lamps, bicycles lights, sealed beam lamps, flashlight accessories, etc.
These items are nearly all finished products, it will surely have a big impact on the U.S. importers if the tariffs go into force. However, the 10% LED tariffs are still pending, it will undergo a two-month review process with a public hearing held from August 20-23, and Post-hearing rebuttal comments will be submitted on August 30. After these processes were finished, it might be going into effect. Thus there is with only 1 month or so left for us before the taxes are activated.
Since China is the global industrial center, the lighting businesses in China have great advantages in overall cost compared to other areas, more than 85% of led lighting products are assembled and manufactured in China. As a result, it would be difficult for the consumers in the U.S. to find alternatives made in countries other than China even with the 10 percent or more tariffs. It is estimated that the extra cost of tariffs will be shared by the U.S. consumers and Chinese producers.
To counteract the LED tariffs and keep you products stay competitive, following is the “3R strategy” that will help you avoid the tariffs hit your led business:
1. Request discount on the ordered products by increasing the quantity.
You can place orders for a much bigger quantity than usual and to get for a 10% discount on it, and deliver goods by partial shipment. Normally suppliers are willing to do it as they can also get cheap price from raw material suppliers with big quantity. In the lighting industry, costs are of huge difference based on different quantities.
2. Redesign the products to cut the cost.
Modify the structure, using another material or apply a new design, etc, either method can bring you a cost down for led lighting products. In led industry, there are numerous new designs and special materials appear every year. Keep your eyes open for it, you are very likely to get for the same product but much lower price.
3. Recommend alternatives.
The main purpose of the LED lamps or LED luminaires is to emit light, therefore you can easily to find another kind of LED lamps that can serve the same purpose. For example, in U.S. market the LED troffer is really popular and user-friendly for retrofit projects, but it’s a little expensive compared to LED Panel light, which it is also a pretty hot product serves with same functionality, in this circumstance you can recommend the panel light to your customers. Not just the LED troffer has alternatives, for other led lamps you can also look for alternatives that can fit the original criteria, and recommend the new one to your customers, such as LED Glass Tubes, instead of using LED Alu Tubes.
The trade war seems to be inescapable in the short term, although it will result in damage on both sides, we can prepare in advance and come up with a counter plan to minimize our losses.