Tariffs' Complex Ripple Effects Hit Appliance Shoppers And Makers

Apr 9, 2019
Originally published on April 9, 2019 11:22 am

It was a daunting task. Amid a major renovation, Jani Mussetter needed a lot of appliances: a washer, dryer, refrigerator, freezer, dishwasher and stove. As she visited showrooms in January, a stressful thing kept coming up: warnings of a price increase on Feb. 1.

For Mussetter, who was shopping for higher-end appliances, that potentially meant paying hundreds of dollars more. And why? "They said, because of all the tariffs," the San Francisco resident says.

Tariffs and the trade war have been in the news for more than a year, since President Trump began imposing higher taxes on various imported products and materials.

For regular American shoppers, major household appliances perfectly illustrate the complicated reality of the trade dispute. One tariff was a boon to some domestic manufacturers. But other tariffs hiked costs for the entire industry worldwide. Prices on appliances are now slowly recovering from their biggest increase in about five years.

Whirlpool's gamble

Whirlpool, a leading American appliance-maker, is at the heart of the issue. Its prices had barely changed for many years, says G.research housing analyst Alvaro Lacayo. Then, in 2018, he says, "you saw a big tick upward."

At first, higher prices were welcome news for Whirlpool. They reflected the company's victory over its two main foreign competitors, South Korea's LG and Samsung.

Whirlpool — which also own Maytag, Jenn-Air and other brands — had spent years arguing that LG and Samsung had been "dumping appliances into the U.S. market at below cost, rendering competition irrational," as Lacayo put it.

In January 2018, President Trump agreed with Whirlpool. He set a new tariff, or tax, on imported washing machines, starting at 20 percent. Selling washers to Americans became more expensive for foreign companies. And domestic manufacturers like Whirlpool could finally raise prices.

But then, Trump imposed more tariffs, on metals including aluminum and steel. Steel, in particular, is critical to building almost any appliance.

Suddenly, appliance-makers everywhere, including Whirlpool, began complaining about the rising cost of raw materials. They had little choice but to start raising their own prices.

"Global steel costs have risen substantially and, particularly in the U.S., they have reached unexplainable levels," Whirlpool CEO Marc Bitzer said during an analyst call in July 2018.

What happens next

Steve Sheinkopf owns Yale Appliance & Lighting in the Boston area, and he's a third-generation owner. "We have been here for almost 100 years now; it's hard to believe," he says.

Many brands Sheinkopf works with — like Wisconsin-based Sub-Zero and Wolf or Germany's Thermador — regularly inch up their prices, he says, but the increases in the past year have been bigger than most.

Sheinkopf predicts that appliance prices have probably stabilized at this point, at least for a while. But for shoppers who chase sales and specials, he says, promotions haven't been as good as they used to be three to four years ago.

Overall, prices of major appliances tracked by the consumer price index are starting to tick down month-to-month. But they are still higher than they were last year.

"On certain products, you could be looking at a 14 to 16 percent increase from last year to this year," Sheinkopf says. "When you talk about [washing] machines that people want to buy, front-loaders, I think you're looking at $200 to $400 difference versus last year."

Many companies stretched some of the price increases into early 2019, still citing high costs of raw materials as well as changes in the currency market and labor costs. That's what Mussetter experienced as she rushed to buy appliances for her remodel before Feb. 1.

"I'd be really bummed if I was walking in today," she says with a laugh. Mussetter did manage to buy all her appliances ahead of the price jump. Later, she learned this saved her $1,250.

And one other thing happened last year, Whirlpool's Korean competitors, LG and Samsung, fast-tracked new manufacturing plants — in America. It's great news for American jobs. But for Whirlpool?

"I think this is the biggest challenge they'll ever have," Sheinkopf says.

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RACHEL MARTIN, HOST:

OK. We're going to spend the next few minutes talking about household appliances. Not so much about how they can refrigerate your food or wash your clothes, but rather, how they help us understand the current trade dispute between the U.S. and China. NPR's Alina Selyukh explains.

ALINA SELYUKH, BYLINE: Home renovations. If you've done one, you know it can be exasperating, time-consuming, expensive. And Jani Mussetter is doing more than a renovation. She's doing a remodel - bathrooms and a whole new kitchen.

JANI MUSSETTER: It really was daunting, the whole experience. You know, I bought everything. I bought a washer, dryer, a refrigerator, freezer, dishwasher, a range.

SELYUKH: And as she was going to showrooms for all these appliances in January, this stressful thing kept coming up.

MUSSETTER: The moment I walked in, everyone pretty much warned me that February 1, everything was going up.

SELYUKH: As in going up in price. And because Mussetter was shopping on the higher end, that could mean hundreds of dollars.

Did they say why?

MUSSETTER: They said because of all of the tariffs.

SELYUKH: The tariffs. They've been making a huge impact on the cost of appliances in the U.S. Take Whirlpool. It's a leading American appliance maker, and Whirlpool prices barely changed for years, says Alvaro Lacayo, housing analyst at G.research.

ALVARO LACAYO: And then when you look at what happened in 2018, you saw a big tick upward.

SELYUKH: And at first, the price ticking upward was pretty welcome news for Whirlpool. It reflected Whirlpool's victory over its two main foreign competitors, LG and Samsung. They're both based in South Korea, and for years, Whirlpool argued...

LACAYO: That LG and Samsung had been dumping appliances into the U.S. market at below cost, rendering competition irrational.

SELYUKH: And last January, President Trump agreed with Whirlpool. He set a new hefty tariff on imported washing machines. Selling washers to Americans became more expensive for foreign companies, and domestic manufacturers, like Whirlpool, could finally raise prices. But then Trump imposed more tariffs - on metals, like aluminum and steel, which is critical to building almost any appliance. Suddenly, appliance makers everywhere, including Whirlpool, began complaining about the rising cost of raw materials. They had little choice but to start hiking their own prices.

STEVE SHEINKOPF: On certain products, you could be looking at a 14 to 16 percent increase from last year to this year.

SELYUKH: Steve Sheinkopf owns Yale Appliance and Lighting in the Boston area, and he's been in the industry his whole life.

SHEINKOPF: I'm the third-generation owner. Yeah. We're here in Boston and have been here for almost a hundred years now. It's hard to believe. You know, I haven't been here all hundred.

SELYUKH: But, you know, about 1/3 of that. Sheinkopf says many brands he works with, like Wisconsin-based Sub-Zero and Wolf, or German Thermador, they regularly inch up their prices. But in the past year, the increases have been bigger than most. Now overall prices of major appliances, tracked by the Labor Department, are starting to tick down month to month, but they are still higher than they were last year.

SHEINKOPF: When you talk about machines that people want to buy, front-loaders, I think you're looking at $200 to $400 difference versus last year.

SELYUKH: Sheinkopf predicts prices are probably stabilized at this point, at least for a while. But for shoppers who chase specials and deals, he says promotions have not been as good as a few years ago. He's noticed one other thing about Whirlpool's Korean competitors. Last year, both LG and Samsung fast-tracked two manufacturing plants in America. It's great news for American jobs, but for Whirlpool...

SHEINKOPF: I think this is the biggest challenge they'll ever have.

SELYUKH: And Mussetter, who is remodeling her house, she did manage to buy all her appliances before the February price jump. She later learned that saved her more than $1,200. Alina Selyukh, NPR News. Transcript provided by NPR, Copyright NPR.