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Imports of home appliances rising against backdrop of Trump tariff action

U.S. imports of home refrigerators, stoves and vacuum cleaners rose sharply in late 2017 amid heightened scrutiny of dumping and import surges by the Trump administration, according to data from Panjiva Research, a global trade and logistics information data firm.

While U.S. imports of those appliances have been relatively cyclical for the better part of five years, all of the categories experienced spikes and record import levels in the months leading up to Nov. 30, 2017, the latest date for which the import data is available.

U.S. refrigerators imports, which reached $5.31 billion in the 12 months to Nov. 30, 2017, are the largest home appliance import category in dollar terms. That appliance category set a three-month dollar import record of $1.55 billion from September through November 2017, the Panjiva data showed.

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Mexico continues to dominate the refrigerator market, accounting for $300.6 million of imports in December 2017, followed by South Korea at $99.7 million and China at $85.3 million. On a last-12-months basis, the U.S. imported $3.05 billion worth of refrigerators from Mexico through November 2017, $1.03 billion from South Korea and $942.8 million from China.

Panjiva research analyst Christopher Rogers said in an interview that the rise in home appliance imports bears a striking similarity, albeit on a smaller scale, to that of large residential washing machines from Asia, which rose ahead of President Donald Trump's decision Jan. 22 to approve an International Trade Commission recommendation. The U.S. has long monitored dumping of imported products, arguing that the practice hurts domestic industries.

In recent months, The Trump administration stepped up enforcement of dumping, imposing tariffs of up to 50% on larger residential washing machine imports from Asia and other countries, as well as a separate tariff on imported solar panels. The move sparked an immediate reaction from South Korea, which filed two cases against the U.S. at the World Trade Organization to challenge the tariffs.

In the wake of that decision, Rogers said other consumer appliances could potentially be the target of a safeguard petition filed by a U.S. producer or initiated by the Trump administration if it feels foreign sellers are dumping products in the U.S. below market value.

The Trump administration has given no indication that it plans to file a case against other home appliance imports or is considering tariffs, and no U.S. producer has filed such a case to date.

However, Rogers said foreign home appliance producers, cautious about scrutiny from the U.S., could be increasing imports in the event the administration turns its sights on other products such as refrigerators or stoves.

"They're saying: 'OK, we're not quite in the position washing machines were in but we could be there in a heartbeat. Let's be a bit more aggressive in terms of importing and maybe take advantage of it before it occurs,'" Rogers said.

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If Trump were to target an imported product from China that has dominated the market or accelerated greatly, vacuum cleaners would fit the bill, Rogers said. According to the firm's data, vacuum cleaner imports rose 25% from September through November 2017, the greatest growth rate among major home appliances.

"If [Trump] is looking for a product that China is dominant in imports, then vacuum cleaners are it," Rogers said.

From September through November 2017, the U.S. imported $792.7 million of vacuum cleaners, above the $714.6 million record set in the prior three-month period and a substantial increase over the $634.4 million worth of imports in the three-month period a year earlier. Vacuum imports from China accounted for 74.8% of total U.S. vacuum imports over the prior 12 months.

Meanwhile, U.S. imports of stoves have risen 19.7% over the 12 months ended Nov. 30, 2017, while those imports on a three-month basis have risen 15.4%. China also controls the lion's share of that product, accounting for more than 53% of U.S. stove imports from November 2016 to November 2017.

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While no cases have been filed or tariffs recommended for any of these additional home appliances, there are general tariffs in place of up to 35% on imports of refrigerators, vacuums, stoves, dishwashers and microwaves, according to Panjiva.

Rajeev Dhawan, director of the Economic Forecasting Center at the Robinson College of Business at Georgia State University, said the increase in imports could also be due to rebuilding efforts from hurricanes Harvey and Irma, which crippled parts of the southeast U.S. and Texas in August and September 2017.

"You have to remember we also had the hurricanes in August and September that destroyed a lot of stuff," Dhawan said. "There was a big surge in spending in September, October and November, and if so, you have to supply things. How would that get done? It was imported. The effect of the hurricanes is there."

Unlike the washer case, which was predated by country-specific tariffs that led to so-called "country hopping" by manufacturers to avoid U.S. tariffs, Rogers predicted that any tariff brought against the other home appliances would be all-encompassing, in an effort to both put American companies on a par with importers and urge foreign companies to increase U.S. production.

In the case of washing machine tariffs, data compiled by Panjiva shows that Samsung Electronics Co. Ltd. and LG Electronics Inc. increased shipments of washing machines from Thailand and Vietnam to the U.S. ahead of when Trump was expected to make his decision on tariffs.

Samsung is the largest importer of refrigerators and stoves, according to Panjiva. The company increased its seaborne imports of refrigerators to the U.S. by 69.3% in the fourth quarter of 2017 compared with a year earlier, Panjiva said.

Neither Samsung nor LG Electronics Inc., another importer of home appliances, responded to a request for comment from S&P Global Market Intelligence. In addition, Whirlpool Corp., which filed the washer petition, did not respond to a request for comment on other home appliance imports.

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The Association of Home Appliance Manufacturers, a trade group that represents home appliance manufacturers in the U.S., declined a request for comment, but data provided by the group shows that 10.90 million refrigerators were shipped for the U.S. market, both imported or domestically produced, in 2016.

The 2016 figure marks the fourth straight year of increases of refrigerator shipments, according to the trade group, which estimates 10.30 million fridges were shipped in 2015, after rising from 9.71 million in 2014 and 9.40 million in 2013.

The likelihood of further tariffs being imposed on household appliances is unknown at this point, Dhawan said, though it is a possibility. Dhawan said that, should negotiations of the North American Free Trade Agreement not go well and saber rattling with China continue, household items could be targeted as a retaliatory action.

For the past seven to eight years, retailers have been reluctant to pass on added costs to consumers, but now that the economy is running at its full potential, Dhawan said importers could very well pass on added costs to sellers who would then pass them down to buyers. However, if manufacturers import heavily and tariffs are never imposed, producers will have to drop prices to liquidate, he said.

"There have never been tariffs on household items in history that I can remember," Dhawan said. "There's no precedent like that. Twenty years ago, this stuff was still made in the U.S. or in nearby countries."