Tariffs on China could hike price of flat-screen TVs

President Donald Trump and the Chinese government are doubling down on their heated trade dispute. The world's two largest economies are threatening to impose tariffs on a broad range of each other's imported goods in a way that experts say could ultimately hit consumers' wallets.

One popular product that may face a tariff: flatscreen TVs. The Trump administration's proposal would slap a 25 percent tariff on them if they are imported to the United States from China. Here's a look at why flat screens are on the White House's tariff list and how their prices could be affected if the two sides don't agree on a trade deal.

Q: Why are TV's being targeted?

A: The Trump administration says that China has stolen intellectual property from American companies and also forced U.S. firms to share their technology with Chinese partners. The costly levies are designed to push China to abandon these practices.

One way to do that is by targeting TVs, which are not an essential like clothes or phones but which still represent billions of dollars in imports and would hurt Chinese producers. Of the 41.5 million TVs exported to the United States last year, about 47 percent were imported from China, according to Bob O'Brien, president of Display Supply Chain Consultants, a market research firm in the display industries. Big name brands, such as Japan's Sony and Korea-based Samsung and LG, work with Chinese manufacturers or have subsidiaries in China where TVs are assembled and then shipped to the United States. In a blog post this week, O'Brien said the value of TVs imported from China last year totaled about $4 billion, which would be subject to Trump's tariff. So, TV makers who export their products from China to the United States would have to pay $1 billion.

"The goals of these retaliation lists is to maximize economic pain on the other country and minimize the pain for your own country," said Edward Alden, a senior fellow at the Council on Foreign Relations and author of "Failure to Adjust: How Americans Got left Behind in the Global Economy.

Q: Would the TV tariffs cause prices to rise?

A: "If you put a 25 percent tariff on those TVs, that's a billion dollars worth of tariffs that eventually goes through to be paid by consumers," O'Brien said.

Last year, the average cost of a 55-inch flatscreen TV in North America was $559, according to Paul Gagnon, an analyst with data firm IHS Markit. If the full cost of the tariffs is passed on to consumers, people looking to purchase a new TV would pay about $140 more.

But there's also the possibility that TV manufacturers could avoid the full cost of the levy, O'Brien said. Companies could start assembling more of their TVs in Mexico, which already accounts for 44 percent of American TV imports, which are dutyfree under NAFTA rules. Manufacturers could also build production plants in the United States.

In those cases, consumers may not absorb the full effects of the tariffs.

Q: Is the existing trade deal the reason why TV prices are low now?

A: Compared with last year's $559 average cost for a 55-inch set in the United States, that same size TV would have cost $1,240 in 2012, Gagnon said. TV prices have fallen because of intense competition, boosted manufacturing capacity and huge economies of scale, experts said.

Mainstream TVs made in high volume are notoriously low-margin products. That makes it harder for companies to turn profits on popular TV models and puts pressure on them to base their operations where manufacturing costs are lowest.