Rarely do we spend so much time on CE product shipping, but the current tariff situation forces us to pay extra attention, despite a number of CE exemptions.  To be perfectly honest, we have spoken with a number of folks in the shipping business and a lawyer that specializes in import/export and the conclusion we have come to on what the cost of bringing a TV set made in China into the US is…nobody knows.  We have seen calculations ranging from 5% to over 100%, and the variability is enormous.  This leads us to focus more on container prices as an indicator of the broader effects of the tariff situation. 
Container rates generally have been flat over the last few weeks, certainly lower than this time last year (China/East Asia to US West Coast rates are down 31.8% y/y) but still higher than pre-Red Sea crisis rates.  With considerable talk about Chinese shipping cancellations one might expect rates to drop further, but some retailers are making the bet that if they schedule a shipment from China now, by the time it is loaded and shipped, the US/China tariff situation will be settled, and that has kept rates from falling further.  As many CE companies pulled in shipments to fill warehouses in the US, the panic that bare shelves might incite has yet to begin, but those willing to bet on a quick settlement will also be the first to restock shelves even if no deal is reached, albeit at a much higher price.
That bet also has other implications.  If they are correct and the US and China settle their trade differences quickly, there will be a snapback in shipping, likely leading to a short-term rise in container prices as capacity is constrained.  Ports would likely see considerable congestion with shippers desperate to offload and get ships back to China to get as much low tariff product to the US before anything else changes.  But more likely, negotiations will be drawn out and an eventual interim solution will be reached,  which China will honor for a short while and the administration will use as a victory lap.
We note that in January 2020, President Trump signed the “Phase One” trade agreement with China.  The agreement was made on the promise that China would purchase an additional $200b in US goods and services over the 2020 – 2021 period.  According to US data, they purchased only 58% of the total committed amount, which gave President Biden the justification to continue to apply trade pressure.  While the Trump administration will likely use any agreement as an ‘all good’ sign and back off excessive tariffs, we expect that China will do its best to buy only what it needs over the remaining time the current administration is in power.
While this is certainly one scenario, China, as an authoritarian one party state, is less influenced by popular opinion, and at least from the outside, does not seem to be facing much opposition to the tariffs that it has put on US goods.  We expect US consumers will be less forgiving if a trade deal is not quickly reached, especially as 3Q winds down and the holidays approach, carrying much higher prices.  This makes us believe that an agreement will be reached quickly once negotiations start, and those willing to make the current shipping bet will come out ahead, sort of..

As Samsung Electronics’ (005930.KS) 2025 premium TV line has only been available for ~40 days, we did not expect that prices would have changed from their initial levels, however we expected to see some price pressure on older (2024) models as production wanes for last year’s models and shifts to the 2025 line.  The big question was whether the typical price reductions for the previous year’s Tv set line would be offset by tariff costs.  We cannot answer the question fully yet, but in Samsung’s 2024 4K Mini-LED/QD line, where we would typically expect some price erosion, prices rose by 28.6% over the ~30 day period, as shown in Figure 1, bringing them back to levels seen at the beginning of this year.  Similarly, the entire 2024 4K premium TV set line (includes both Mini-LED/QD and QD only) saw a 20.1% price increase.  The 2024 8K line did not see much of a price change (+1.8%), while the 2024 QD only sets saw a 7% price increase, even as the offerings for about 1/3 of thoses line are no longer available.
Samsung’s 2025 OLED TV set line, which has been available for ~ one month followed a more typical early pattern and saw no price change during the period, however the 2024 OLED line did.  While the high and mid 2024 OLED price tier models saw a modest 2.9% decrease in price, as one might expect, the low-end models saw the opposite, rising 27.9% in less than 30 days.  Typical monthly price moves for most OLED models are +/-1.2% and while there have been bigger monthly moves than the average, this month’s increase was the largest ever for this segment of the line.
There are always a number of factors at work when it comes to pricing, particularly inventory levels, component pricing, FOREX, and consumer demand, but now we have the added factor of tariffs, which seem to change on a moment’s notice.  We cannot pin down the price movements we have seen here to a particular factor, but we expect there will be considerably more volatility in TV set pricing as existing on-shore inventory gets worked down.  As Samsung’s sets are assembled primarily in Mexico, for the time being they are exempt from more recent tariffs, as long as regional (Chinese components) sourcing does not exceed 40%.
This gives Samsung the ability to (if so desired) maintain low pricing while sets from Hisense (600060.CH), and TCL (000100.CH) rise, capturing incremental volume, however it seems that Samsung is moving prices up, despite the exemptions.  While this will be beneficial in the short-term if it is sustained, it will do little for shipment volumes and customer satisfaction.  With Chinese TV set brands competing aggressively for share in all markets, Samsung gains the price advantage for a while.  Whether they choose to use it to regain share is still an open question.

In front of April 2, CE brands rushed to get containers into the US, only to find that ‘reciprocal’ tariffs proposed by the administration were to be postponed for 90 days.  One would expect brands to take a less aggressive approach to building US inventory levels given the lack of follow-through on these additional tariffs, yet it seems the postponement has done little to stem the inventory build in the CE retail space.  Given the exemptions the administration placed on a number of CE goods it can be seen that the administration is particularly aware of the impact that these potential tariffs would have on the US economy and the US consumer.  Yet brands don’t seem to be convinced that they will be at least partially and possibly fully exempt from new tariffs and continue to build inventory further as ‘protection’.
Sales for electronics & appliance retailers were down on a y/y basis in January and February and up in March (seasonally adjusted) and were above 5-year averages for February and March as shown below, so there was a bit of pre-buying by consumers.  That said, since the April 2 deadline and the subsequent postponement, inventory levels, at least in the PC space, have continued to increase. 
Typically 6 to 8 weeks of inventory are held across the CE retail supply chain, yet it seems that the average currently is about 10 weeks, with some mid and low price tier products in the 12 to 16 week range according to data from primary suppliers.  As we still have over 60 days before the next deadline, there seems to be little panic among brands, but more of a steady stream of additional product, with most traffic through standard shipping containers and little air transport.  But for containers to reach the US and pass through customs, they need to be on the water in early June and container prices to date are remaining steady, a good indication of the anxiety level of shippers at this point in time.  While they are not in a panic, they are not taking any chances.
We are a bit surprised that CE brands are continuing to build inventory after the postponement and exclusions, but it seems to indicate a distrust of the administration’s exemption fortitude and leans toward a worst case scenario in July.  We believe that the impact of reciprocal tariffs should they be implemented on CE products and therefore consumers, would be quite onerous and politically burdensome, making such an enactment very short-term (days/weeks) before exemptions come to the surface again.  While there are lots of countries that could see massive tariff increases, the primary US trading partners will likely be exempted again.  The harder question to answer would be how much the potentially high tariff status of countries like Vietnam, Indonesia, and the Philippines will affect prices if those tariffs are imposed, and whether India will be exempted as these are a key manufacturing centers for CE products.
In the interim, China remains the primary target for tariffs, and to offset the expectations for lower trade with the US, China will continue its efforts to increase local consumption.  We expect they will add additional consumer appliances to the subsidy programs that have been in place for months and will cooperate with provincial governments to add ‘smart’ home-oriented devices to the subsidy list, paid for with another round of bond sales of ~$41b US.  There has been some talk about the central government’s desire to consolidate the semiconductor equipment industry in China by merging China’s ~200 semi equipment companies into 20 primary suppliers.  While this will save subsidy capital and improve cost efficiency, it will take some time to implement and to see results, although it has been done in other industries in the past, typically through M&A financed with government support..

In anticipation of US reciprocal tariffs, shippers have been frontloading cargo since late 2024 and US ports, for the most part, have been able to handle the increased shipments without significant congestion as much product has been offloaded to local warehouses.  With the implementation and subsequent 90-day postponement of the reciprocal tariffs, and the additional tariffs placed on Chinese goods, there are a number of indications that Chinese container bookings are being cancelled, with the Port of LA indicating late last week that it has received notice of 12 potential cancellations.  As Chinese shippers have built US inventory, they can hold new shipments for a while as landed inventory gets worked down, but smaller US importers are unable to deal with the on-again-off-again tariff situation as easily.
A recent Freightos survey of small business importers in the US revealed that on a general basis the average rate of ‘concern’ over the tariff situation was 8.9 out of 10, with 62% of respondents choosing 10.   We have seen some panel producers indicate that they are trying to make production adjustments on a bi-weekly basis as customers rapidly change plans in this volatile environment, but small businesses are far less able to make such short-term  alterations to schedules.  When asked what their thoughts were concerning the administration’s plans for further tariff changes, here’s what they said:

• 51.3% said there is no way to know
• 22.6% said they expected tariffs to be reduced
• 17.4% said they expected tariffs to be increased
• 8.7% said they expected tariffs to remain the same

More significant was the response to the increased global and Chinese tariffs from a business perspective:

• 33% have paused shipments entirely
• 29% are exploring sourcing outside of affected regions
• 29% will ‘wait and see’
• 19% are accelerating shipments

Aside from the obvious planning issues that face both large and small CE product shippers, even with the exceptions we have noted previously, small importers face cash flow issues as they now have higher upfront customs costs that they cannot always pass on to customers.  Some are now itemizing shipping costs on invoices to make customers aware of how substantial the changes are, and a number of survey respondents indicated that they would not be able to remain in business if current tariffs remained in place for an extended period.  Many indicated that they are unable to source in the US at a reasonable cost and a number of companies we have spoken with indicated that while they can make relatively small changes between production locations, establishing production in the US would take years and would be limited to higher value products that could absorb higher production costs.
All in, while the tariffs themselves are a serious issue for small CE importers, the uncertainty around tariff policy and the lack of a coherent plan seems to be the real issue that leads to questioning whether some can sustain their business in light of their inability to plan for or recover some of the additional customs costs that still remain.  With the administration threatening additional tariffs, new port call fees for Chinese vessels, and the end to the de minimis exemption for direct-to-consumer shipping on May 3, small importers are facing  serious issues that can cause further disruptions to their business or end it entirely, not the desired goal of current tariff programs. We expect some front loading to resume again as we get closer to July, but the inevitability of price increases to cover higher overall shipping and/or sourcing costs will begin to show as pre-April inventory is reduced.  Large producers can absorb much of the increased cost and reduced cash flow, while smaller ones cannot.

While there are still a few murky areas, Friday’s exemptions to the latest round of tariffs afford the CE space a bit of breathing room during the 90-day postponement of President Trump’s reciprocal tariff program.  At least as far as can be seen based on current White House statements, while the exemptions shown below remove the additional tariffs placed on specific Chinese goods entering the US, they are still subject to tariffs that were placed on said products previously, which we believe amount to ~50% on most semiconductor products.  Therefore exemptions only seem to remove the last round of additional tariffs, leaving those previously levied.
All of this said, the President and cabinet officials continue to insist that new semiconductor and similar tariffs are ‘under investigation’, but with no timeframe attached, only give very near-term relief to CE companies, doing nothing for mid-term or long-term planning.  CE companies can always make promises to shift more capacity to the US, but in most cases such commitments will take years to plan and execute.  For those that are willing to make such a commitment, we remind them that Foxconn (2354.TT) still has plenty of room at its Wisconsin “6th Wonder of the World” manufacturing center, even after Microsoft’s (MSFT) $3.3b data center construction plans for a portion of the site.  As of January (2025), Microsoft has put two of the three Foxconn site projects on hold[1]
While the Friday semiconductor exemptions give CE companies a bit of breathing room, the volatility remains, and while it will take some time for Trump-aligned CE companies to come up with satisfactory plan for production in the US, placating headlines can be created by leaking that some production has been shifted out of China, preferably to an existing production location with low potential reciprocal tariff liabilities.  Given how often the trade situation changes, we expect only those countries or even companies that are so desperate to maintain trade with the US will make more substantial concessions until more trade stability can be maintained.  Rumors stating that some of Apple’s (AAPL) production lines in China have been shuttered have been denied by suppliers, but we expect more of the same until a more stable policy can be established, 1,307 days left…
Semiconductor exemptions

• 8471:  Automatic data processing machines, magnetic or optical readers, machines  for processing such data, including (847330) parts & accessories.  While not specifically mentioned, it seems to cover all desktop and laptop computers.
• 8486: Tools for the manufacture of semiconductor boules or wafers, semiconductor devices, electronic integrated circuits or flat panel displays.
• 85171300: Smartphones.
• 85176200: Routers, modems, and network equipment  
• 85235100: Solid-state non-volatile storage devices.
• 8524: Flat panel display modules, with or without touch
• 85285200: Computer monitors.
• 85411000: Diodes, other than photosensitive or light-emitting diodes.
• 85412100: Transistors, with a dissipation rate of less than 1W.
• 85412900:  Transistors, with a dissipation rate greater than 1W.
• 85413000:  Thyristors, diacs and triacs, other than photosensitive devices.
• 85414910, 85414970, 85414980, 85414995:   Photosensitive semiconductor devices, meaning LEDs and other light-sensitive sensors.  
• 85415100: More specific to LEDs.
• 85415900: This covers pretty much any semiconductor that has not been covered previously, and parts (85419000) including piezoelectric crystals
• 8542: Broad coverage of Microprocessors (CPUs), Memory chips (RAM, ROM), Logic, Amplifiers, Processors and controllers.

We note also that ‘certain critical minerals’ were also excluded from the additional Chinese tariffs, and while not specified, we can guess at a few of them, particularly the ones for which the US relies almost exclusively on China.  Yttrium and Scandium fall under the 280530 code, with Yttrium used in red display phosphors, YAG lasers, microwave (radar) filters, automobile exhaust sensors, superconductors, and in fuel cells.  The US imported over 400,000 kg. of Yttrium in 2023, with China being the source for 99.2% and 94% for yttrium compounds.  Even a simpler material such as graphite, used to line furnaces, for lithium-ion batteries, as a lubricant, in electric motors, and, of course, in pencils, is not produced in the US, which buys 42% of its common graphite and 100% of its battery grade graphite from China.  China has put some limitations on where such materials may be exported, but they have yet to take a hardline when it comes to strategic materials tariffs.   are an area where the US


[1]  While no public details have been given as to why the postponement by Microsoft was made, the company has reduced data center capacity plans in a number of locations this year.

​The Indian government has indicated that recently (March to early April) Apple (AAPL) has been air shipping iPhones from their production sites on the sub-continent to the US in order to beat the latest round of tariffs.  According to sources in India, six cargo jets have been used, each with a capacity of 100 tons, to move the phones into the US before the April 5 deadline, with the last one earlier this week.  This capacity implies, using a package weight of 12.4oz, that the total shipments included ~1.5 million iPhones (not our calculations), that had been part of an emergency assembly program that included a Sunday production addition at Foxconn’s (2354.TT) largest assembly plant, and an accelerated push through customs at the Chennai airport that cut customs throughput time from the usual 30 hours to ~6 hours.  For reference Foxconn typically ships between $110m to $331m (value) from India to the US monthly, but saw shipment value increase to $770m in January and $643m in February.  It was said that the Indian government put in a request with customs officials to ‘support’ Apple’s expedited clearance, which the company had been planning since last June as tariff rhetoric increased.

​While headlines are oriented toward incoming President Trump’s tariff policies that have yet to be formulated or implemented, we noticed that a Day 2 EO has called for reviews of a wide variety of trade practices by various agencies in the Executive Suite, with reports due by either April 1 or April 30.  They range from evaluating the US/Canada/Mexico Trade agreement to the potential for building an ‘External Revenue Service’ to collect tariffs.  Also mentioned under the auspices of the Secretary of the Treasury review is an evaluation of the $800 De Minimis duty exemption available to foreign retailers selling to US citizens.  That exemption allows for the duty-free importation of goods valued at $800 or less per person per day and is the driving force that allows companies like Temu (PDD) and Shein (pvt) to sell low-priced goods in the US without paying tariffs.
Many consider this exemption a way for China to bypass tariff regulations, giving them an advantage over US companies like Amazon (AMZN), WalMart (WMT), and Target (TGT) in a broad sense, although the impact is greater on discount retailers like Burlington (BURL), TJ Maxx (TJX), or Ross (ROST).  The exemption was raised from $200 to $800 in 2016 to facilitate trade and boost economic activity but also to speed up shipments and reduce the burden on customs processing. According to the US Customs & Border Protection Service, over 4m de minimis shipments enter the US each day, up substantially after the 2016 change, so the elimination of the exemption, while reducing the advantage that low-cost Chinese goods providers have in the US, it would also force an increase in processing time and likely require additional hiring for the customs service.  While that aspect of the exemption will go relatively unnoticed should it be eliminated or reduced, the exemption is certainly political fodder and is already the subject of Congressional debate.  With a report from the Treasury on the exemption due at the end of April, we expect at least some change in that rule in 2Q.  It’s low hanging fruit that plays into anti-China sentiment and has only minor consequences.

​In a never-ending battle with China, the US has continued to tighten export control rules concerning semiconductors, particularly high-performance GPUs that are used for AI.  The US government has been working to close any loopholes that might allow companies to skirt the restrictions and are constantly updating the rules to be more inclusive, further limiting China’s ability to purchase these essential parts of Ai infrastructure.  Nvidia (NVDA), the primary producer of such devices, has made a number of modifications to its processors in order to meet the specifications that the government has imposed and continue selling in China, yet invariably those specifications are tightened, forcing Nvidia to lower the performance of processors it is able to sell to Chinese customers.
In Nvidia’s most recent quarter China represented ~15.4% of sales, making it an important customer and one willing to pay a premium to obtain such GPUs, however it is expected that over the next few days the Biden administration will put in place a new trade mandate that will not be based on performance as much as customer location, separating the globe into three tiers.  While Nvidia and the SIA are adamantly against this new rule set and are appealing to the Biden administration not to put them into effect, especially considering the possibility that the new administration might modify or reduce their limitations, there seems to be a last minute urgency by the Biden administration.  Here’s how the new rules are expected to work:

• Tier 1 - The U.S. and 18 allies (including Australia, Belgium, Canada, Denmark, Finland, Germany, France, French Guiana, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, South Korea, Sweden, Taiwan, and the U.K.) will have 'near-unrestricted access' to advanced AI processors developed in the U.S as long as they do not install more than 25% of their processing capacity outside of Tier 1 countries or more than 7% in any single Tier 2 country
• Tier 2 – These countries face a cap of 50,000 GPUs purchased over the two-year period between 1/1/25 and 12/31/27, although companies in Tier 2 countries can gain a higher level if they comply with US regulations and are validated.  The countries in Tier 2 are primarily those in Eastern Europe, the Middle East, Mexico, and Latin America
• Tier 3 – These countries (Belarus, China, Iran, Macau, Russia, Cuba, North Korea, Syria, Sudan, Myanmar, Zimbabwe, Afghanistan, Central African Republic, DR Congo, Eritrea, Ethiopia, Haiti, Iraq, Nicaragua, Libya, Somalia, and Iraq), will face a near total ban, but details as to the level of performance that will be allowed has not been made available yet, although they will likely tighten the performance specifications further. 

While it would not affect semiconductor companies directly, the new rulers are thought to include more detailed restrictions on AI companies that wish to host large models outside of the US.  The hosting and model restrictions are thought to completely restrict Ai companies from exporting the trained parameters (weights) of their models to Tier 3 countries, while hosting in Tier 2 countries is allowed if US security standards are met.  Potentially there could be limitations on open-weight models (those that make the model’s internal structure available publicly) if they are fine-tuned for specific applications even in Tier 2 countries, where they would have to be licensed by the US government if the tuning requires significant computing power.  Should these direct model rules be implemented it could slow global AI development and deployment, while giving the US a technical advantage over others, even our allies.  Depending on the scope of the AI limitations we expect an intense focus on how to circumvent such rules if implemented by Tier 2 countries.
It is questionable as to whether there is a reason to put new rules into effect just days before the new administration is installed as the likelihood of material changes is high.  While the public face of the Biden administration was steadfast as to restricting China’s semiconductor and Ai growth, we expect the Trump administration to use existing or new rules as a lever rather than a mallet, not only with China, but also with allies, particularly Taiwan and Singapore, that are either very substantial semiconductor importers or are major producers.  That said, what the public sees and what is really being negotiated could be even less transparent going forward than it was previously.  

On January 2, the Chinese Ministry of Commerce added 28 US companies to its ‘Dual-use Export Control List’, prohibiting the export of said ‘dual-use’ items to any on the list.  Dual-use items are any goods, technologies, or software that has both civilian and military applications.  Examples would be navigation and avionics systems, electronics and communications equipment, biotechnology and biomedical equipment, and certain tools and materials.  In December we noted that China had restricted exports of additional rare earths and materials that are used in the manufacturing of advanced semiconductors and weaponry, while also having broad applications in consumer products.  We expect that the Chinese government will continue to add to this restricted list as the US does to its trade limitations with China.  As of yesterday, all exporting of Chinese product to these companies is halted and any Chinese company that considers exporting to these US companies as essential has to submit an application to the Ministry of Commerce.  If China holds to the same mindset as the US, it will be denied.
Here’s the list:

• General Dynamics (GD)
  • General Dynamics Ordnance and Tactical Systems
  • General Dynamics Information Technology
  • General Dynamics Mission Systems:
• L3 Harris Technologies (LHX)
• Intelligent Epitaxy Technology (IntelliEPI): 4971.TT
• Clear Align LLC: (pvt)
• Boeing Defense, Space & Security: (BA)
• Lockheed Martin Corporation: LMT
  • Lockheed Martin Missiles and Fire Control
  • Lockheed Martin Aeronautics
  • Lockheed Martin Missile System Integration Lab
  • Lockheed Martin Advanced Technology Laboratories
  • Lockheed Martin Ventures
• Raytheon Missiles & Defense – (RTN)
  • Raytheon/Lockheed Martin Javelan Joint Venture
  • Raytheon Missile Systems
• Iron Mountain: IRM
• Inter-Coastal Electronics: pvt
• System Studies & Simulation: pvt
• Applied Technologies Group: pvt
• Axient: pvt
• Anduril Industries: pvt
• Maritime Tactical Systems: pvt
• Pacific Rim Defense: pvt
• AEVEX Aerospace: pvt
• LKD Aerospace: pvt
• Summit Technologies Inc.: pvt