the trade war reaches procter & gamble -- and into the medicine cabinet personal finance

by:JEBSEN ARTS      2020-04-18
The latest headache is the trade war between President Donald Trump and China.
For P & G, the latest round of tariffs imposed by the Trump administration on Chinese imports will raise manufacturing costs for many household staples.
Two weeks ago, the company lobbied that more than a dozen imported goods were excluded from the list of Chinese products worth $200 billion, which will be subject to trade penalties that will take effect next week.
Like hundreds of other companies, it was brushed off.
At a time when the industry is facing challenges, tariffs on China\'s leading consumer goods maker bite P & G.
The cost of raw materials is rising.
Profit margins are falling.
There is a lot of pressure on retailers to price.
New home and beauty brands are hot.
Sales growth stagnated in the face of weak demand.
P & G (PG)
The case highlights the key role of Chinese labor and factories in the supply chain of top manufacturers in the United States --
As well as obstacles to rapid transformation of complex production networks.
The American kitchen, medicine cabinet and supply cabinet all depend on China.
West Virginia Procter & Gamble has factories all over the United States, and more than 90% of the products sold domestically are produced by the company.
But like many other American giants, Procter & Gamble relies on parts and materials from China when making and packaging brands.
No one in the United States produces these parts.
The company told the Trump administration that it uses Chinese parts to produce Crest and Oral-
B. toothpaste and toothbrush, Febreze air freshener, soft and Bounce dryer sheet, Braun electric shaver, head and shoulders, Pan Ting and Olay shampoo and Swiffer
While Trump thinks tariffs will support American businesses, Cincinnati-based P & G, which has a history of about 181, disagrees with the strategy.
\"Tariffs\" will hurt P & G\'s manufacturing industry. S.
On September 6, Selina Jackson, the company\'s vice president in charge of government relations, wrote to Trade Representative Robert Lighthizer.
She warned the decision would push prices higher, lower P & G\'s profitability and hurt its market share.
P & G will also build a $0. 5 billion factory in West Virginia.
The plant will provide the company with 1,800 jobs, \"representing the manufacturing base of the future \".
It is automated and digitized and will enable P & G to reduce costs and produce products such as Dawn soap and head and shoulder shampoo more effectively.
But some infrastructure in the factory
Pipes, tanks, containers
Production in China.
Without a US manufacturer producing specialized components, tariffs will make it more expensive for P & G to build and operate factories.
\"These new P & G jobs in West Virginia will be damaged by the proposed tariffs,\" Jackson wrote . \".
\"With the impact of tariffs affecting P & G\'s manufacturing cost structure, P & G will be under tremendous pressure to increase the price of finished products.
The White House did not respond to requests for comment.
Bicycle helmets, child car seats, high chairs, vacuum cleaners and toothbrush handles for Apple watches and Air Pods all won the extension of this round of tariffs, but Procter & Gamble\'s efforts to obtain the exemption did not succeed.
Without these exceptions, the company\'s production costs will rise.
Higher costs will force a tough choice: P & G may have to raise prices for retail buyers like Walmart, which could lead to higher consumer prices.
If the company decides not to pass on these costs, its profits will fall.
\"Tariffs will actually constitute a tax on personal care products, and the burden will undoubtedly be borne by American families,\" the personal care products Commission --
A trading group representing more than 600 companies
Told the government two weeks ago.
Because consumers buy home staples over and over again, the increased cost of tariffs over time will be extracted instead of being pulled out once like a TV or washing machine.
P & G, in another letter to Lighthizer, cited several highly technical examples of its exposure to Chinese suppliers in the supply chain.
The company imported artificial sweeteners, sugar concentrate, to make toothpaste.
70% of the world\'s sugar products are produced in China, and there are no major sugar producers in the United States.
The government also included in the final tariff list \"preparing for the incense or deodorant room \".
This will apply to the wall-plug-
In the version of Febreze.
P & G said no American company had copied the technology.
Relocation of production, assembly lines, test equipment and compliance standards takes 18 months to two years.
The administration will not
Woven fabric, the raw material used by P & G for soft and Bounce dryer sheets.
Only one supplier in the United States produces fabrics that meet the precise level and weight required by P & G and are operating at full capacity.
P & G said the facility was \"extremely unlikely\" to increase production due to high construction costs.
The tariff of the vacuum cleaner will \"create a huge price pressure\" on the rechargeable vacuum cleaner because it is made in China and takes 18 months to two years to build production elsewhere, including in the United States. P&G\'s Oral-
Pulse battery-
Operating a vibrating toothbrush is another product that feels the impact of tariffs.
Although P & G produces brush heads in the US and assemble and package the brand here, the brush handles are made in China.
The company warned that tariffs on handles would result in more expensive prices for finished products.
This could reduce demand and force P & G to cut jobs.
Battery-hand pump
Braun beauticians will also face higher costs.
More than a decade ago, production moved to China, and the company said it needed a lot of investment and intensive R & D efforts to meet the standards.
Finally, the tariffs will hit the head and shoulders, Olay and Pantene shampoo bottles.
Each brand sells a manual pump.
Plastic pumps are made in China and are part of the daily soap, shampoo, body wash and detergent of other manufacturers.
The personal care products Board has highlighted the importance of these pumps throughout the industry.
Increasing their costs will make each bottle more expensive for consumers.
\"The impact is complex,\" the organization said . \"
\"The cost of this pump will be higher, the cost of soap will be higher, and these increased costs will be multiplied by the large amount of cosmetics and personal care products purchased by Americans for daily beauty needs.
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