Electrical contractors who purchase LED luminaires should pay attention to the prices of these products because, according to Mike Watson, vice president and general manager of e-conolight (a division of Cree), prices are going to rise as a result of the trade war.
The tariff that affects LED luminaires is called "List 3," which is the third round of tariffs.
"Of note, this tariff does not affect LED lamps or downlights, which are on the consumer end of things," Watson said. "They are leaving the consumer products as a last resort for tariffs, if they need to go the next round, which would be the final round."
The first tariff on LED luminaires took effect on Sept. 24, 2018. A 10-percent tariff will hit all shipments coming into the United States. Beginning Jan. 1, 2019, that will increase to 25 percent.
Since the September tariff occurred so quickly, many manufacturers and channels that sell LEDs were caught by surprise, according to Watson.
"However, we were paying attention to this and taking steps to deal with things even before List 1," he said.
While the tariff will jump 15 percent on January 1, Watson doesn't anticipate prices will increase immediately. Rather, he believes prices will increase gradually over time, because channels that sell LED luminaires will have a mix of no-tariff, low-tariff and high-tariff LEDs in stock.
"However, by the time you get into the April-to-June time frame, customers will have purchased virtually all of the no-tariff and low-tariff supplies, so prices will become quite a bit higher by then," he said. In other words, it's not the specific date of January 1 that is important, but rather when channels begin to run out of existing supplies.
For electrical contractors, Watson believes it would be wise to pay attention to a number of things. First, he recommends purchasing as much inventory as possible prior to January 1.
"Second, contractors should talk with their channels, whether they are online channels like e-conolight or brick-and-mortar channels such as local or national distributors, to see if any prices changes have been implemented," he said.
It is also a good idea to ask channels about their inventory position to see what they have available in stock. Next, it is important to pay attention to continuity of supply—whether the channels are buying the same product they have been in the past.
"Unfortunately, as a way to keep prices down, you will see some distributors bringing in new, less-expensive products, but which don't have the same performance quality or reliability as the ones they used to carry," he said.
Finally, Watson said it is important to pay attention to the political landscape as it affects tariffs.
"The next major event is the meeting between President Trump and China's President Xi in December," he said.
The trade war could change depending on the outcome of that meeting, but Watson isn't betting on it.
"We have to plan under the assumption that these tariffs will be in place long-term, and I believe they will," he said.