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iRobot finds consumers won't pay for tariffs; Skechers steps up imports

The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains and draws from global shipping and freight data.

iRobot shows best laid plans can fail as 23% of firms talk tariffs
The third-quarter corporate earnings season is bringing a new crop of comments regarding the impact of tariffs and Brexit. Panjiva's analysis of 1,142 calls shows 22.7% of firms have discussed the two topics despite the vacuum of certainty regarding the outcome of the U.S.-China "phase one" deal and the final form of Brexit.

The industrials sector continues to see the most discussion, with 41.5% of calls including trade policy keywords, while the consumer discretionary sector stands at 33.1%. U.S. tariffs on Chinese exports have been in place long enough now for companies to see if their strategies will work, or not.

iRobot Corp.'s CEO, Colin Angle, has stated the firm has "rolled back prices to pre-tariff levels" in order to "defend our category leadership." The reversal of the strategy — passing on tariffs to consumers — has worked. Companies across most industries have tried to pass tariff costs on to consumers so may want to follow iRobot's lead.

iRobot's U.S. seaborne import growth of 10.6% year over year in the third quarter outpaced the hoover-sector average, but a 2.4% decline in shipments associated with the firm in September bodes ill for the fourth quarter. By contrast its competitors BISSELL Homecare Inc. and SharkNinja Operating LLC have seen import growth of 12.2% and 17.3% year over year respectively.

(Panjiva Research - Consumer Discretionary)

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Skechers may need to redraw strategy as tariffs land
Footwear maker Skechers U.S.A. Inc. is already feeling the impact of U.S. tariffs on Chinese exports, which were applied to the apparel sector in September. CFO John Vandemore said lower profits were linked to higher unit costs which "were partly attributable to increased tariffs effective during the quarter."

The firm has "made some decisions to absorb certain elements of the increase in the short term to the benefit of our customers," a common strategy among firms facing tariffs for the first time. Skechers may have tried to boost imports ahead of the tariffs — Panjiva's data shows U.S. seaborne imports associated with the firm jumped 36.6% year over year in August.

The reliance on China has actually increased to 66.7% of total imports in the third quarter from 45.4% a year earlier, though that likely reflects a surge in shipments to get ahead of the next round of tariffs. Those could take effect in mid-December, in the midst of Skechers seasonal uplift in imports, depending on the result of U.S.-China trade talks.

(Panjiva Research - Apparel)

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Steel tariff regime may need retargeting as SeAH's long products surge
The G20's Global Forum on Steel Excess Capacity may be about to hold its last meeting, with global steel protectionism having actually increased since its formation in 2016. Oversupply — combined with weakening industrial demand — has driven down U.S. steel prices despite the imposition of section 232 tariffs by the Trump administration. The price decline may be about to change with Nucor CEO John Ferriola stating "that in many of our products that pricing has bottomed."

So far the one-size-fits-all tariffs of the section 232 program have succeeded in cutting imports. U.S imports of steel fell 16.6% year over year in the three months to Aug. 31. Yet, long steel products have been something of an outlier with a decline of just 3.8%. Some long steel imports have actually been increasing, with imports from South Korea having climbed 21.3% year over year in September.

That's been led by a 114% jump in imports associated with SeAH Steel Holdings Corp., while Hyundai Steel Co. and POSCO's shipments have declined. Further improvements in U.S. steel market conditions may therefore require a fine-tuning of steel tariffs.

(Panjiva Research - Metals & Mining)

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F-Pace off the pace as Jaguar Land Rover plots Defender growth strategy
Tata Motors Ltd.'s Jaguar Land Rover Holdings Ltd. is moving into new distribution facilities at the port of Brunswick, GA in order to accommodate future growth from the forthcoming Land Rover Defender model.

Brunswick represented 30.1% of U.S. seaborne imports associated with Jaguar Land Rover in the 12 months to Sept. 30, with Baltimore and Hueneme being the other major handling ports. JLR's move demonstrates that the challenges of a weak market for sales, Brexit uncertainties and potential U.S. tariffs on British automotive exports are only hiccups in the firm's long term development.

Recent growth, with U.S. seaborne imports up 9.7% year over year in the third quarter, has been due more to Land Rover than the Jaguar marque. Indeed, imports of the F-Pace SUV may have dropped 3.7% year over year in the third quarter.

(Panjiva Research - Autos)

South Korea consumers' wrath may be driving detente with Japan
Prime Minister Shinzō Abe and Prime Minister Lee Nak-yeon have started the process of normalizing relations between Japan and South Korea, with Abe stating "relations must not be left in their current state." The political spat has spread into trade with the withdrawal of trusted trader status by both sides.

There's also evidence of a consumer boycott in South Korea of Japanese products. Japan's total exports to South Korea fell 15.9% year over year in September. In the electricals sector there was a 42.8% slump in audio-visual equipment, including TVs, while the autos sector suffered a 51.9% drop in the shipment of cars.

The wider economy may also be weakening with South Korean imports of Japanese construction equipment down by 46.7%. Japan's imports from South Korea meanwhile have only fallen by 8.9% in September, driven largely by lower refined oil and computer component shipments.

(Panjiva Research - Policy)

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.

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