Washer makers up despite trade step

Shares of South Korean appliance makers rose Wednesday as investors shrugged off a recommendation by U.S. trade officials that President Donald Trump impose tariffs on foreign-made washing machines they say are undercutting domestic manufacturers.

Commissioners from the U.S. International Trade Commission, at a hearing in Washington on Tuesday, offered a range of choices within a three-year quota system for Trump, who is expected to issue a final ruling by early next year. South Korea's trade ministry said it may consider filing a complaint with the World Trade Organization after a decision is reached.

The case is a test of Trump's vow to crack down on countries that don't follow international trade rules. American appliances giant Whirlpool Corp. has accused Samsung Electronics Co. and LG Electronics Inc. of selling washing machines in the U.S. at below fair-market value while shifting production around to avoid U.S. anti-dumping duties.

LG said in a statement Tuesday that it's reviewing the International Trade Commission's move, calling Whirlpool's complaint an effort to restrain competition. Samsung also issued a statement Tuesday saying "any tariff would raise prices, provide fewer product choices and impair job creation at our South Carolina factory."

Samsung shares rose 1.2 percent in Seoul on Wednesday, while LG Electronics jumped 3.2 percent.

While Samsung's washing-machine business could be hit by tariffs, the overall impact on the conglomerate would be negligible, according to Morningstar analyst Dan Baker in Hong Kong. "It makes a tiny proportion of its profits from washing machines," he said. "It makes the vast majority of its money from memory semiconductors, smartphones and display panels."

Whirlpool said in a statement that it's encouraged by the International Trade Commission's recommendations and is confident the Trump administration will take action "to prevent continued abuse of existing trade laws by companies that seek an unfair advantage over American workers." Its shares gained 2.2 percent Tuesday in New York, for the biggest one-day advance since Oct. 20.

Commission officials suggested the U.S. impose a 50 percent tariff on imports of large residential washing machines above 1.2 million units. The rate would be lowered in subsequent years to 45 percent and then 40 percent. Two of the four commissioners also recommended an additional tariff of as much as 20 percent on imports below the 1.2 million-unit threshold.

The commissioners recommended excluding nations that have trade agreements with the U.S. from the tariffs, but South Korea's Samsung and LG brand washers would be affected because they largely are imported to the U.S. from manufacturing hubs in Vietnam and Thailand. The U.S. is currently in talks to renegotiate its trade pact with South Korea.

Excluded from the import tariff recommendations are countries with which the U.S. has free-trade deals, including Australia, Canada, Mexico and Singapore, according to the International Trade Commission's statement.

South Korea will coordinate with relevant countries such as Vietnam before deciding whether to file a complaint with the WTO, the trade ministry said in a statement Wednesday released after a meeting with LG and Samsung officials.

The trade commission's recommendations ratchet up trade tensions with a key ally at a sensitive time between the nations on economic and geopolitical fronts. In addition to the U.S. pursuit of a free-trade agreement with South Korea, American diplomats are trying to work with their counterparts in Seoul to address North Korea's nuclear program.

In a so-called safeguard petition filed with U.S. trade authorities in May, Whirlpool alleged that Samsung and LG pursued a strategy of selling washing machines in the U.S. at artificially low prices. The South Korean companies would move production work between Asian countries to do an "end run" around U.S. anti-dumping laws, Whirlpool said.

The International Trade Commission, a federal agency that investigates trade disputes, ruled last month that growing imports of residential washing machines was causing "serious injury" to American manufacturers. Whirlpool says correcting the problem will help create U.S. manufacturing jobs.

The case is the latest in an ongoing dispute extending back years between the appliance-makers. Whirlpool alleged in 2011 that its overseas competitors received unfair government subsidies. In 2013, South Korea filed a World Trade Organization dispute challenging the U.S. Commerce Department's calculations. It won a ruling from the WTO last year.

The trade commission's washing-machine recommendation comes as it weighs a separate high-profile trade dispute between Boeing Co. and its overseas rivals. The commission is expected to make a decision next year on the plane-maker's claim that it was injured by Bombardier Inc.'s strategy of selling the C Series passenger jet at "absurdly low prices" in the U.S. The Commerce Department issued a preliminary ruling in September imposing duties on the Canadian aircraft.

Information for this article was contributed by Jing Cao and Corinne Gretler of Bloomberg News.

Business on 11/23/2017

Upcoming Events