GE Appliances' Chinese Owner Prepares For a Hit From Tariffs

(Bloomberg) -- One of China's largest appliance makers is preparing for the impact of U.S. trade tariffs as it seeks to expand its international footprint.

About 5 percent of products sold in the U.S. by GE Appliances -- a unit of Qingdao Haier Co. -- are imported from China and face tariffs now or will get hit by those being proposed by the Trump administration, Li Pan, vice president of the home appliance group, said in an interview. Top executives at GE Appliances, the American white goods unit that Haier acquired in 2016, are in discussions with the U.S. government as part of a group representing appliance makers to remove affected products from the tariff list, he said.

Businesses in both the U.S and China are pushing back against the tit-for-tat trade fight, warning that it's hurting consumers. Despite the concerns, the two countries continue to intensify the spat: Beijing on Friday released another tariff list designed to retaliate against a U.S. threat to impose higher duties on $200 billion of Chinese imports.

Made in USA

Since acquiring Louisville, Kentucky-based GE Appliances from General Electric, the vast majority of Qingdao Haier products sold in the U.S. have been manufactured there, said Li. Still, GE Appliances has already raised prices of its products twice this year due to the wider effects of the trade war.

“The inflation caused by the trade war and the volatility in commodities prices has an impact on our effectiveness and profits,” said Li Monday in Shanghai. “That's the same for all businesses.”

In January, the Trump administration slapped duties starting as high as 50 percent on imported washing machines. That was followed by a 25 percent tariff on steel imports and 10 percent on aluminum imports.

The challenges posed by tariffs aren't stopping Haier from forging ahead with its international expansion plans. It expects overseas revenue, which made up 42 percent of overall sales, to continue to accelerate. The company is open to acquisitions of companies for high-end appliances in Europe, Li said.

The company's plan to list its shares in Frankurt is on track, Li said, and it has met with investors to gauge interest.

“Despite the geopolitical tensions, we feel that it's a bigger risk not to press on with our internationalization strategy,” Li said. “This is a global trend, and it's the companies that do not internationalize that go extinct.”

To contact Bloomberg News staff for this story: Rachel Chang in Shanghai at wchang98@bloomberg.net;Amy Li in Shanghai at yli677@bloomberg.net

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Jeff Sutherland, Charlie Zhu

©2018 Bloomberg L.P.

With assistance from Editorial Board