Simulation of Loss Estimates: Samsung Electronics to Suffer $350 Million from US Safeguard Measures on Washers | BusinessKorea

Monday, February 26, 2018

Samsung Electronics and LG Electronics will suffer a direct hit to their exports of washing machines by the U.S. government’s safeguard measures.
Samsung Electronics and LG Electronics will suffer a direct hit to their exports of washing machines by the U.S. government’s safeguard measures.
Seoul, Korea
25 January 2018 - 10:00am
Jung Suk-yee

Eugene Investment said on January 24 that the U.S. government’s safeguard measures against South Korean washing machines can result in an annual loss of up to US$350 million in Samsung Electronics’ washing machine exports to the United States. The amount is divided into a decline of US$240 million in annual sales and an extra cost burden of US$110 million. The calculation is based on Samsung Electronics’ annual washing machine export volume and sales in the U.S. market estimated at 1.2 million units and US$1 billion, respectively.

According to Eugene Investment, the 600,000 washing machines subject to a tariff of 20% are likely to incur a cost burden of US$48 million in total assuming that the tariff is equally borne by consumers and Samsung Electronics. “The products not covered by the tariff rate quota are subject to a tariff of 50%, which can lead to a decline in sales of US$240 million,” the securities brokerage company explained, adding, “Assuming a decline in sales of about 50% attributable to the 50% tariff, US$240 million in sales, equivalent to 300,000 washing machines, is likely to be lost.” The company continued to say Samsung Electronics’ total additional cost burden will amount to US$60 million if Samsung Electronics and consumers equally bear the 50% tariff about the remaining 300,000 washing machines.

“The same calculation can be applied to LG Electronics, which exports approximately 1.1 million washing machines to the United States a year,” Eugene Investment went on to say, adding, “Although the 50% tariff can significantly affect both companies’ washing machine sales in the U.S. market unlike the low-rate tariff, their actual losses are likely to be smaller than our simulation result given their inventory and plant operation schedules in the U.S.”

In the meantime, U.S. President Donald Trump remarked on January 23 (local time) that the measures will urge LG Electronics and Samsung Electronics to keep their promise to build washing machine manufacturing plants in the U.S. He also said that the safeguard measures will lead to no trade war. 

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