What if the US imposes higher tariffs on TVs and monitors imported from China to the US?

The potential for escalating US-China trade tensions under President-elect Donald Trump raises critical questions about the display industry’s future. If the US considers higher tariffs on TVs, monitors, and displays imported from China, the impact will vary by segment. While Chinese dominance in LCD TV panels and global TV manufacturing could face challenges, the notebook PC display market, led by South Korean and Taiwanese makers, may experience less disruption. Deborah Yang explores the implications of these potential policy changes and their ripple effects on the global display supply chain in her latest blog.

Donald Trump, who described himself as a “tariff man,” made numerous protectionist proposals, such as adding a tariff of 10% on goods imported from all other countries, with significantly higher levies of 60% on imports from China, during his presidential campaign. After his victory in the US presidential election on November 5, 2024, President-elect Donald Trump is expected to evaluate how his campaign promises, including implementing broad-based tariffs, might translate into policy, although there are growing concerns that higher tariffs will not only drag down the US economy, disrupt supply chains, and stoke the inflation but also will invite retaliation from the US trading partners.

Will geopolitical tensions and protectionism concerns rise again in 2025?

Although questions remain about the timing and execution of Trump’s tariff increases, importers across industries are  preparing for various scenarios to shape their strategies. They must determine whether to absorb the costs, pass them on to consumers, or remove Chinese components from their products. If Trump’s more extreme tariff policies, are adopted, the global impact could be significant.

Display supply chain participants, particularly TV display makers, are closely monitoring as heightened tariffs on Chinese imports during the 2018 US-China trade war, severely impacted TV producers and retailers. With Trump set to return in January 2025, escalating tensions between the US and China are fueling concerns  about future potential disruptions to the display industry.

· In early August 2023 rumors circulated about a   potential increase in tariffs on TVs or TV displays shipped to the US as analyzed in the Display Dynamics – August 2023: Rumors regarding higher tariffs being imposed on TVs imported from China to the US.

· On September 13, 2024, the Biden administration’s Office of the United States Trade Representative (USTR) officially announced tariff increases of up to 100% on imports from China. The measure targeted strategic sectors, including steel, aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and various medical products. However, the finalized Section 301 tariff increases excluded TV products. Despite this, concerns persist among participants in the TV display supply chain.

· On September 24, 2024, the chairman of the United States House Committee wrote a letter to the United States Department of Defense (DOD) highlighting national security risks posed by China’s growing dominance in the global display industry. The letter requested the inclusion of two Chinese display companies on the DOD’s Chinese Military Companies List (also referred to as the Section 1260H list). While displays are typically linked to civilian applications such as televisions, they are increasingly being integrated into advanced weapon systems, including Javelin missiles and drones. The named Chinese display makers immediately clarified that they are not on the Section 1260H list or any other export control or sanctions list. They also emphasized that their business operations remain unaffected by restrictions targeting other entities.

The risks of higher tariffs on the made-in-China TVs and a new tariff to be imposed on IT products like monitors, notebook PCs, and tablets imported from China to the US are raising concerns among supply chain participants.

·   The impact on TVs may be less pronounced, as imports from China was accounted for only 22% of the US TV market in 3Q24.
·   In contrast, the impact on IT goods such as monitors could be significant given that China was the source of 84% of imported monitors to the US during the same period.
·   Furthermore, displays, predominantly supplied by Chinese panel makers, are widely adopted in various consumer electronic products and IT goods. These displays could face sanctions, such as tariffs or bans especially if linked to military-like devices.

What if the US imposes higher tariffs on TVs imported from China?

The 2018 US-China trade war, , severely affected TV makers and retailers with both governments engaging in prolonged negotiations 2019 to settle trade disputes. For detailed insights,  refer to Omdia’s special analyses: Impact of Proposed China Tariffs on US TV Market, Impact of proposed US tariff increase on imported Chinese goods - Displays – 2019, and TV Display & OEM Market Tracker - Q4 2019.

Ultimately, tariffs on TVs increased by 7.5%, in top of an existing 3.9% general duty. These higher tariffs  led to increased supply chain costs and higher average selling prices (ASPs) for many commodities, squeezing profit margins for TV makers and retailers. To mitigate the impact, many TV makers restructured their supply chains, relocated production outside China or invested in new TV manufacturing capacities abroad to avoid the elevated tariffs on TVs destined for the US market.

Historically, China has been the primary source of TV imports for the US. However, higher tariffs introduced in late 2019 have drastically shifted the landscape with Mexico and Vietnam gaining significant market shares by 2021 as shown in Figure 1. By 3Q24, only 22% of TV’s imported into the US originated from China with most shipments now coming from Mexico, followed by a surge from Vietnam. Global TV brands and OEMs, including several Chinese companies, have been diversifying production outside China since 2020.
· If the current tariffs on China-made TVs increase from 11.5% to 60%, manufacturers will likely accelerate the relocation of production outside, driving demand for expanded manufacturing in in other regions. The tariffs on TVs shipped from these countries to the US, if any, will increase by 10 percentage points from the current 3.9% to 13.9%.

- TV makers relying solely on TV production in China will face significant challenges. On the other hand, major players with large volumes such as Samsung, LG Electronics, Hisense, TCL, TPV, and Foxconn, which have competitive production capacity in Mexico and other regions outside China like Vietnam, Indonesia, and Thailand, stand to benefit.

- The biggest beneficiary is the TV maker Element, which has TV assembly lines in South Carolina, the US. Element sources semi-knocked down (SKD) components from many Chinese TV makers and is the major supplier for Walmart’s Onn TV. For Element, having TV manufacturing in South Carolina, the US, can exempt them from paying tariffs.

· If the current tariffs on China-made TVs imported to the US (11.5%) increase by 10% and a new tariff of 10% is added to imports from other countries, TV brands and OEM makers may not rush to relocate production. However, they will likely focus on simulating and calculating the impact on their TV supply chain costs before deciding how to reshape their production strategies.

· From the US retailers’ perspective, it is unlikely that they will take immediate action to adjust their supply base or pull forward TV shipments from their Asian TV vendors to build up inventories, as it is the high-selling season. Instead, they will review their sell-through results and closely track any updates on Trump’s new tariff policy.

· In the short term, supply chain participants are focused on the possibility of pulled-forward demand ahead of new tariffs set to take effect in 2025. If sell-through results during the  Black Friday 2024 meet retailers’ expectations, retailers, including Walmart, will pull in some demand for goods shipped from China to the US. This is due to the potential implementation of Trump’s “Tariff 2.0”, which would typically trigger a transition period of three months, or at least 100 days, allowing supply chain participants time to respond to the changes.

Geopolitical tensions and protectionism are undoubtedly reshaping the supply chain, but China’s role in TV manufacturing—specifically in backlight module and set (BMS) production—remains difficult to replace. China’s TV manufacturing capacity, which is concentrated in Guangdong and other coastal provinces, saw significant growth starting in 2010. Its production capacity share peaked in 2019 but began to decline due to escalating US-China trade war tensions.

The available TV production capacity in China peaked in 2020, following a surge in global TV demand during the pandemic. However, the share of China-made TVs continued to decline as some TV makers shifted production capacity outside China to avoid higher tariffs and disruptions caused by China’s lockdowns.

In 2022, both the available TV manufacturing capacity in China and its share of global TV capacity declined due to slower demand. Additionally, as geopolitical concerns grew, TV makers shifted more of their production capacity to sites overseas. Regardless of the declining TV capacity share, China continues to dominate global TV manufacturing, holding over 50% of the market. Notably, the entire supply chain for TV displays and TV set-related materials and components is deeply embedded in China where skilled and efficient labor supports the industry.

It remains to be seen whether another run of tariff increases on TVs shipped to the US will occur. From the supply chain’s perspective, it is critical to note China’s role and competitiveness in TV manufacturing (backlight, module, and TV assembly) and the dominance Chinese panel makers hold over LCD TV panels.

What if the US imposes tariffs on monitors imported from China to the US?

If there is a new tariff on monitors imported from China to the US, the impact will be significant. Currently, China is the most important and biggest country of origin of imported monitors to the US, accounting for 84% market share in 3Q24.

• If the current zero tariffs on China-made monitors imported to the US increase to 60%, it will compel all manufacturers of China-made monitors to relocate production outside China. This would necessitate expanding monitor manufacturing capacity in non-China countries. Tariffs on shipping monitors from these alternative countries to the US, if applicable, would increase from zero tariffs to 10%.

• If the current zero tariffs on China-made monitors imported to the US increase by 10% and a new tariff of 10% is also added to other countries, monitor brands and OEM makers may not immediately shift production. However, they will become more aggressive in investing to build or extend monitor production outside China. For more details on monitor makers’ manufacturing capacity outside China, please refer to Omdia’s Monitor Display & OEM Market Tracker. 

Currently, most monitor display and set production capacity is concentrated in China, but most monitor brands are actively working to relocate set capacity to other countries. If geopolitical tensions escalate, it is anticipated that up to 40% of monitor set capacity may need to shift outside China.

• Dell has instructed its monitor OEMs, including Qisda, Wistron, and Foxconn, to expand capacity outside China. 

- As one of Dell’s OEMs, Qisda can support Dell with an annual capacity of 10 million units, which could account for more than 40% of Dell’s supply chain. Qisda already launched new capacity in Vietnam in 2023, initially reaching 100,000 units per month in 1H23 and increasing to 200,000 per month in 2H23. The number of monitor manufacturing lines will increase from two in 2023 to eight in 2024., with further plans to expand to 12 lines in 2025. Ultimately, capacity will grow to 600,000 per month.

- In 2023, Wistron also established a new capacity in Vietnam. It started with one line and a capacity of 50,000 units per month, increasing to two lines and 100,000 units per month by 2024.

• HP established the capacity to produce 27-inch monitors through Qisda in Vietnam in 2024. 
• Lenovo is planning to shift its monitor production from China to Vietnam but has not yet made a final decision.
• Samsung is asking its monitor OEMs, including HKC, TPV, and BOE VT, to set up production capacity outside China. 
- HKC launched new capacity in Vietnam, allowing its total annual capacity to reach 3 million. This new capacity is mainly dedicated to Samsung’s OEM orders.
- TPV also shifted its OEM capacity for Samsung from China to Thailand.
- BOE has already launched new capacity in Vietnam, allowing it to produce TVs and monitors. Its total capacity has reached 3 million units per year, and BOE VT is planning to invest in a new fab in Vietnam. 

What if the US imposes tariffs on displays imported from China to the US? 

Flat panel displays, widely adopted in various consumer electronic products and IT goods are now largely dominated by Chinese panel makers, as shown in Figure 2. Amid rising tensions between the US and China particularly due to Trump’s proposed higher tariffs on China-made products, concerns are mounting among participants in the display supply chain. There is growing fear that flat panel displays could face sanctions, such as being subject to tariffs or even being banned, if they are used for military-like devices.

Recently, rumors surfaced about a potential new tariff of up to 15% featuring China-made displays. Although unconfirmed, these reports have already unsettled the display supply chain. If implemented, such a tariff could have far-reaching effects, especially given the oligopolistic nature of the TFT LCD display market particularly the LCD TV display industry, where Chinese panel makers hold significance dominance.

From early 2023,  the LCD TV panel supply base has seen drastic changes. Several LCD TV panel makers, including Samsung Display, LG Display, and CEC Panda, have either exited the panel business or expedited their plans to do so. As a result, Chinese panel makers have further solidified their dominance in the LCD TV industry particularly in key size segment. For example, Chinese panel makers supply 75–85% of  global 32- and 55-inch panel production and dominate the market for ultra-large sizes (65-, 75-, and 85-inch and larger). Notably, nearly 100% of ultra-large panels, such as 98-, 100-, 115-, and 116-inch panels are produced by Chinese display makers. leaves TV makers worldwide heavily dependent on Chinese suppliers for LCD TV panels.

If tariffs are imposed on China-made displays, the added costs will likely be passed on to consumers in the US driving up prices and contributing to imported inflation. This could weaken demand as US consumers have grown accustomed to affordable large TVs. For Chinese display makers, weaker demand in the US, the world’s largest TV consumption market, particularly for large and ultra-large displays, could lead to lower fab utilization rates and operational challenges.

Alternatively, Chinese display makers might mitigate the impact of potential tariffs on displays by compensating strategic TV makers for the resulting increase in supply chain costs. This strategy could help TV makers stay price-competitive in the US market. However, the financial implications for Chinese panel makers cannot be overlooked, regardless of whether they will have more flexibility in adjusting panel prices and utilization as their Gen 10.5 fabs begin to depreciate in 2025.

The dynamics for PC displays differ from those of TV displays. Chinese panel makers hold less than 50% market share in the notebook PC display segment, while South Korean and Taiwanese display makers are projected to occupy over half of PC display shipments in 2024. If a new tariff is imposed on China-made PC displays, PC brands and OEMs may need to reevaluate their supply chain strategies, shifting to South Korean and Taiwanese panel makers. In anticipation of these risks, some Chinese panel makers are planning to build their display module capacity outside China.

As speculation grows about the potential implementation of Trump’s “Tariff 2.0,” following his January 20, 2025 inauguration, supply chain participants are bracing for various scenarios to mitigate potential impacts.

Tariff increases, if any, will eventually have an impact on supply chain participants in China’s manufacturing industry for products imported to the US. If a tariff war becomes unavoidable, it will prompt vendors in the supply chain for TV and IT products to relocate their production bases outside China. Tariffs on China-made displays if imposed, would have a significant impact. Chinese panel makers would need to enhance their cost competitiveness for LCD and OLED displays and strategically support their customers to drive demand in China’s domestic market and other global markets outside the US.