China-US Trade War Begins: How Can the Lighting Brands Open up Multi-channel?

On July 6, the United States began to impose a 25% tariff on $34 billion worth of Chinese goods, implying that China-US trade war was officially launched.

In fact, as early as March, the Trump administration has announced that “the $50 billion tariff is imposed on Chinese goods due to intellectual property infringement and investment restrictions are implemented”; in early April, based on the results of the “301 Survey”, the Office of the US Trade Representative imposed a 25% tariff on  $50 billion worth of China’s exports to the United States, including 1,333 items in aerospace, information and communications technology, robotics and machinery industries. However, the main products of the lighting industry are not covered in the list.

China-US Trade War Begins, Channel Diversification Becomes Brands Standard 

The lighting products involved in this list are mainly industrial intermediate products, including chips and backlight products. Although these products account for low  proportion in China’s lighting industry exports to the United States market, still the U.S. is one of the biggest importers of Chinese lighting products.

According to the data from third-party organizations, Europe, North America, and Asia are still the three main markets for the export of lighting products in China. In February 2018, they accounted for 32%, 30%, and 24% respectively. In the China-US trade war, new materials are the main areas, which will definitely affect the development and export of innovative lighting in China.

At the same time, the impact on the whole industry is the sharp depreciation of the US dollar since 2017. The exchange rate loss of many enterprises is equivalent to the evaporation of annual profits. The U.S. Trump administration aims to enhance the competitiveness of the manufacturing industry and strengthen the export protection policy. The U.S. dollar will continue to be weak in the future.

The leaders of many lighting companies have said: “the most important thing in dealing with the China-US trade war is to strengthen our research and development capabilities, open up and diversify sales channels, and sell products to the world.”

According to the data from China Association of Lighting Industry, in the first quarter of 2018, the export of lighting products continued to rebound, with a year-on-year growth of 10.38%. Traditional lighting products continued to decline, with fluorescent lamps and HID products falling by a large margin; LED replacement light sources increased by a large margin, reaching 78.29%; another export growth driving force is fixed lamps and portable lamps, reflecting the gradual recovery of international market demand.

It can be seen that the demand for Chinese lighting products in the global market is increasing day by day. And Zhongshan City has also become the first export quality and safety demonstration area in Guangdong Province. The industrial cluster advantage of Guzhen town (original source of lighting) will be further enhanced.

Many enterprise leaders who have many years’ experience in exporting also make suggestions: it is necessary to adopt some active methods to buffer and mitigate risks. For example, foreign exchange adjustment can be used to offset the risk of exchange rate fluctuations, and forward contracts can be used to reduce the price fluctuation of import and export goods. Other methods include hedging with futures options, locking the cost of related raw materials, etc.