LG to Raise Prices on Washers After Trump Imposes Steep Tariffs -- 2nd Update

LG Electronics Inc. has told retailers it plans to raise prices on its laundry appliances following President Donald Trump's approval this week of steep tariffs on imported washing machines.

"As a result of the trade situation, we will be initiating pricing actions, which will be sent under separate cover shortly," Thomas Yoon, an executive at the South Korean manufacturer, told retailers in a memo dated Wednesday and reviewed by The Wall Street Journal.

Industry experts say they expect LG will raise published retail prices on at least some of its washer and dryer models by approximately $50. Washers and dryers are often sold in pairs.

An LG spokesman confirmed Mr. Yoon had sent the memo but declined to discuss specifics about the potential extent of the price increases or their timing. "The penalties were more severe than recommended by the International Trade Commission, and we're making some adjustments," the spokesman said, adding a goal was to minimize disruption for consumers.

In the fourth quarter, the company accounted for 18% of U.S. retail sales of washers, as measured in dollars, in the fourth quarter, according to TraQline market data provided by the research firm Stevenson Co.

For imports of large residential washing machines, the Trump administration is imposing 20% tariffs on the first 1.2 million units annually, then 50% on those imported after that. It is also putting in place a 50% tariff on imported washer parts. The protections phase down over three years. Mr. Trump also imposed tariffs on imported solar panels.

LG's planned price increase is an early sign of the downstream consequence of such protectionist measures. It wasn't immediately clear whether LG's competitors will follow suit and raise prices, as analysts expect. Free-trade proponents have argued tariffs will lead to higher prices for consumers and prompt retaliatory actions by other countries that make it harder for American companies to sell their products abroad. Supporters of trade barriers say they will protect domestic industries from harmful overseas competition.

Phil Hannon, vice president at Abt Electronics, an appliance retailer in Glenview, Ill., received the memo and said it wasn't clear whether prices would rise more or less than $50 or when they would take effect. He expects more details from LG in coming days.

Mr. Hannon said he ultimately didn't think the price increases would have a significant effect on consumers, saying their choices are driven more by appliance features and innovation. "People will pay for the features they want," Mr. Hannon said.

Whirlpool Corp., the Michigan-based appliance manufacturer, had sought the protections under a long-dormant 1970s-era provision known as the "safeguard law." Whirlpool has argued Samsung Electronics Co. and LG imports have severely harmed its washer business and endangered U.S. jobs. Whirlpool employs more than 3,000 workers at a washer factory in Clyde, Ohio.

LG and Samsung have argued they gained American market share through their innovation, designs and features that consumers have grown to prefer.

Samsung says it has hired more than 600 workers at a new factory in South Carolina, and LG says it is racing to complete its own U.S. plant in Tennessee by the end of the year. A spokeswoman for Samsung Electronics Co. didn't immediately respond to a request for comment on Wednesday.

The International Trade Commission late last year agreed with Whirlpool that domestic manufacturers had been hurt by a surge of imported washers, and Mr. Trump this week gave final approval for tariffs. Mr. Trump on Tuesday said, in an Oval Office signing event, he aimed to "demonstrate to the world that the United States will not be taken advantage of anymore."

In response to questions about LG's price increase, the White House referred to past statements by economic adviser Gary Cohn, who noted LG and Samsung had planned to produce washing machines in the U.S. "Ultimately, we're getting the outcome that we want," Mr. Cohn said previously.

Longbow Research analyst David MacGregor said he expects manufacturers to raise prices but was still surprised at how quickly LG moved. "They really don't have many options," he said.

A Whirlpool spokesman declined to comment on pricing. "This case is about ensuring fair competition among appliance companies and providing real benefits to consumers," he said. "An effective remedy will bring a variety of washer choices at affordable prices."

As for the retailers, a spokesman for Home Depot said Wednesday he couldn't immediately share information about any price changes resulting from the new trade barriers. A Lowe's Cos. spokeswoman said: "We know manufacturers are evaluating the impact of the tariff, but we do not have any specific information from any of our vendor partners at this time." Sears Holdings Corp. declined to comment.

--Sarah Nassauer, Suzanne Kapner and Peter Nicholas contributed to this article.

Write to Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

January 24, 2018 18:02 ET (23:02 GMT)