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US companies warn of consumer impact from China tariffs

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US companies warn of consumer impact from China tariffs

Ink cartridges, refrigerators and freezers could be among the consumer products adversely affected by tariffs on Chinese imports, several company executives told government officials during the second day of public hearings on the divisive action the Trump administration is now weighing.

Following the first day of hearings that was largely split between those in favor of and those opposed to the 25% tariffs on about $50 billion worth of Chinese imports, nearly all the company and trade association officials testifying May 16 warned the Section 301 Committee that the tariffs, if implemented, would raise consumer prices and disrupt existing Chinese supply chains.

AB Electrolux, the Swedish home appliance producer already involved in an appeal of the 72.41% tariff rate on its washing machines imported from Mexico, which was upheld in March by the U.S. Commerce Department, told the committee that its five U.S. manufacturing plants and 10 distribution centers would be at risk should the China tariffs be implemented.

Electrolux's U.S. manufacturing plants rely on China for imported compressors targeted by the tariffs that are used in appliances such as refrigerators and freezers, Alan Shaw, the company's president and CEO of major appliances for its North America division, said, adding that a tariff would only make foreign rivals more competitive.

Sourcing the compressors, which are part of every refrigerator and freezer the company produces, from other countries would take more than a year and drive up production costs due to regulatory safety and performance requirements.

"All it will do is drastically increase the cost of the single most expensive part of every U.S. manufactured refrigerator and freezer," Shaw said. "Foreign manufacturers, because they are not impacted by the tariff, will not have this same increased cost and will therefore not have to raise their consumer price."

General Electric Co. warned that the tariffs would adversely affect its healthcare and aviation businesses.

Karan Bhatia, GE's vice president and senior counsel of global government affairs and policy and a former deputy U.S. trade representative under President George W. Bush, said that about 1,000 of the 1,300 products included under the proposed tariffs would affect the company in some way.

GE asked specifically for 34 products to be removed from the U.S. trade representative's proposed list of targeted imports, noting that the additional tariffs of 25% "would not be insignificant" to the production and retail cost of healthcare and aviation products.

"Both are highly complicated products, both are regulated products here and abroad, and both are critical infrastructure products," Bhatia said. "And so we take an enormous amount of care in how we source and construct these products."

Andy Binder, vice president and general manager of office supplies solutions for HP Inc., said tariffs would exacerbate the issue instead of effectively combating the problem of forced intellectual property transfer by China at the heart of the Section 301 investigation that led to the tariff proposal.

HP competes with Chinese importers who have stolen its cartridge intellectual property, Binder said, adding that tariffs would only increase disparity in cost between legitimate and illegitimate ink and toner cartridges, which he asked be removed from the final products list.

"Tariffs would not distinguish between legitimate and illegitimate products," Binder said. "Across-the-board tariffs would make illegitimate products more readily available and attractive."

The retail industry also testified May 16. It has been vocal about concerns that its products could potentially be included in retaliatory measures by the Chinese or further tariff measures between the U.S. and China.

David French, senior vice president of government relations for the National Retail Federation, told the committee that China has a combination of attributes that do not exist elsewhere.

"Even talking about tariffs is raising costs," French said, noting the importance of China in the supply chain.

"Not every country has the combination of port facilities, electrical grid and workforce that is available in China," he said.

The American Apparel & Footwear Association and the U.S. Fashion Industry Association as well as officials from the consumer technology, energy and aluminum industries also testified before the committee May 16.

Following the three days of public hearings slated to conclude May 17, a post-hearing submission period is scheduled through May 22 before the Section 301 Committee makes its recommendation to the Office of the U.S. Trade Representative on how to act on the proposed tariffs.

Talks between top U.S. and Chinese economic officials also continued in Washington on May 16 and are scheduled to run through the end of the week.