Citing claims by domestic appliance manufacturers that imports were harming their sales and risking U.S. jobs, the Trump Administration recently imposed strict tariffs on washing machines imported from overseas. The new regulations add 20 percent tariffs to the first 1.2 million machines brought to the United States each year, then 50 percent tariffs on any washers beyond that number. The drastic and stringent imposition of these tariffs has of course prompted several responses and shifts in the market.

In particular, LG Electronics announced that it would be raising the prices on its laundry appliances for the U.S. market immediately. The South Korea–based manufacturer accounts for approximately 18 percent of retail sales of laundry appliances in the U.S. market—a share that the company argues it has earned by offering innovative features and previously unavailable designs that appeal to American consumers.

But U.S. competitors such as Whirlpool contest this explanation, arguing that the success of LG and other foreign manufacturers, such as Samsung, actually results from their aggressive pricing tactics, which ultimately undermine competition. Whirlpool requested the new tariff, citing a rarely applied regulation from the 1970s called the safeguard law. The Trump Administration agreed that international competition was harming the company and threatening the jobs of the approximately 3000 people who work in Whirlpool’s manufacturing facilities, thus prompting the new tariffs.

Both Samsung and LG disagree, pointing in particular to their ongoing efforts to open new factories in the United States. But the regulation has gone into effect, prompting the price-related response. Although the exact amount of the increase has not been announced yet, retailers are preparing to adjust the numbers on their shelf tags for laundry appliances. Thus consumers who need to get their clothes clean soon will encounter different price points, with no real connection to the features that the products offer: higher for imported goods, lower for those produced domestically.

Discussion Questions:

1. What is the impact of tariffs on retail prices?
2. In the case of washers in particular, how will the new tariffs affect overall sales, as well as sales for individual suppliers like LG and Whirlpool?

 Source: Andrew Tangel, The Wall Street Journal, January 24, 2018