Economic research shows that although steel tariffs have prompted some companies to move their production lines to the United States, consumers have paid a high price for this.
For American consumers, the cost increase caused by tariffs is inevitable
From June 23rd local time, the 50% tariff imposed by the United States on a variety of steel home appliances officially took effect. The new tariff measures will put American companies and consumers under greater cost pressure. According to a notice issued by the Bureau of Industry and Security of the U.S. Department of Commerce, this tariff adjustment will add eight categories of home appliances and related products as "steel derivatives", including dishwashers, dryers, washing machines, refrigerators, air fryers, ovens, kitchen waste disposers, etc., and a unified 50% tariff will be imposed. The tax amount will be calculated based on the value of the steel components contained in each product. However, if the product uses steel raw materials smelted in the United States, it can be exempted from the tariff even if it is processed overseas.
The Trump administration decided in March to impose a 25% tariff on steel, and also imposed tariffs on steel-made derivatives. In early March, when the United States first announced the steel tariffs, the number of products was 172, but the U.S. Department of Commerce has been updating the list since then. This is the second time the Trump administration has expanded the scope of tariff products since raising tariffs on imported steel and aluminum. The U.S. Department of Commerce said that the new tariffs are in addition to the Trump administration's 50% tariff on imported steel and some steel products, and will apply to the steel components of goods.
The eight new categories of "steel derivatives" specifically cover combined refrigerators and freezers; small and large dryers; washing machines; dishwashers; horizontal and vertical freezers; cooking stoves, cookers and ovens; food waste disposers; welded metal racks, etc. Almost all common large steel household appliances are covered, which has a greater impact on Chinese companies exporting such products to the United States.
When the United States first announced the steel tariffs, the number of products was 172
Although South Korean home appliance companies such as Samsung Electronics and LG Electronics produce some products such as washing machines in the United States, a considerable number of products are produced in other countries such as South Korea and Mexico and exported to the United States, and are expected to be affected by the tariff increase. For Haier, which invested and set up factories in the United States relatively early, the new home appliance tariff policy also has an impact, but the scope of the impact will be smaller. Haier currently has 11 factories in five states in the United States, with an annual production capacity of about 10 million units, covering a full range of home appliances such as refrigerators, washing machines, air conditioners, water heaters, and kitchen appliances. In 2023, Haier's refrigerator retail volume in the United States was 4.37 million units, and its production was 1.52 million units. The gap was partially solved by imports; in 2023, Haier's washing machine retail volume in the United States was 4.08 million units, and its production was 2.56 million units. The gap was also solved by imports. According to the new US tariff policy, these imported home appliances will face a 50% tariff increase. Other Chinese home appliance companies face the pressure of tariff increases on all products exported to the United States.
As early as Trump's first term as president, the US government imposed tariffs on imported steel and aluminum products, causing costs in industries such as automobiles, machinery and construction to rise. According to statistics, the steel and aluminum tariffs imposed since 2018 not only failed to help the US downstream manufacturing industry achieve "revitalization", but instead caused it to lose 75,000 jobs. According to calculations by the Federal Reserve and the University of Chicago, the tariffs ultimately increased the price of an ordinary washing machine by nearly $100.
Several trade experts told Caixin that the impact of US steel tariffs has exceeded initial expectations. It may prompt some companies to consider cooperating with local US steel suppliers or adjusting their raw material procurement strategies, but after the adjustments, companies will still face challenges such as the stability of US domestic steel supply, price fluctuations and difficulty in cooperation.
An economic study jointly released by the University of Chicago and the Federal Reserve shows that although such tariffs have prompted some companies to move their production lines to the United States, consumers have paid a high price for this. Specifically, although the relevant measures have created about 1,800 jobs, the average cost of each job is as high as $817,000. In addition, the tariffs on washing machines also affect the prices of clothes dryers, which are not taxed, because the two are usually sold as a set of matching products.
For American consumers, rising costs are inevitable. Although buying American brand products may save some extra costs, the supply chain is not that simple. Many products are made up of multiple parts, many of which are produced in other countries - these parts have no substitutes in the United States.
According to media reports, Samsung Electronics and LG Electronics have begun to readjust their production strategies. The two companies are urgently studying various response plans, including relocating production bases and changing steel procurement. Samsung Electronics and LG Electronics have the top two sales positions in the US home appliance market. With the Trump administration's decision to impose a 50% tariff on steel used in home appliances such as refrigerators and washing machines, the cost burden of Korean home appliance companies is increasing. Steel and other components account for about 30% of the total cost of home appliances, so Trump's home appliance tariffs will increase the manufacturing cost of each product by up to about 15%.
American home appliance dealers said that if the price of an air fryer currently sold is $130, the price of the air fryer may be three times the original price after the new tariffs are implemented. In their view, the US government's tariff policy has seriously affected the survival of enterprises, brought greater uncertainty, and led to economic collapse.
