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Procter & Gamble Co. bracing for impact from Chinese tariffs

Trump tariffs adding cost to P&G supply chain
Posted: 11:42 AM, Sep 21, 2018
Updated: 2018-09-21 15:42:43Z

CINCINNATI - Procter & Gamble Co. has identified more than a dozen products that could be negatively impacted by the latest round of tariffs announced by the U.S. in its ongoing spat with China.

They include Oral-B tooth brushes, Downy and Bounce dryer sheets, Braun electric razors and Pantene and Olay products that come in packages with plastic hand pumps.

The products were identified in a Sept. 6 letter to U.S. Trade Representative Robert Lightizer in which P&G explains that Chinese-made parts and materials are crucial components of products made and sold in the U.S.

“Additional tariffs will lead to higher costs resulting in reduced profitability and P&G competitiveness,” wrote Selina Jackson, P&G’s vice president for global government relations. “Higher costs from tariffs may also translate into higher prices, reduce P&G sales, and undermine American jobs in P&G U.S. operations.”

P&G declined to reveal details on the financial impact of the planned tariffs on roughly $200 billion in Chinese goods. The Trump administration announced a 10 percent tariff on hundreds of products, starting later this month. The tariffs would increase to 25 percent later this year.

It's the second time since July that P&G has identified products impacted by tariffs. When Canada imposed retaliatory tariffs against the U.S., the company said 14 of its brands would be affected. Among the products impacted were Shave preps from Gillette and Venus, hair sprays from Pantene and Aussie, lotion and body wash from Gillette, Ivory, Olay and Safeguard and Febreze air freshener.

P&G lobbied against the Chinese tariffs and asked the Trump administration to exclude a dozen items from its list of targeted goods. Both requests were denied.

"P&G believes strongly in free trade as it helps us best serve consumers, and puts us and our international competitors, wherever they are, on an equal playing ground. Tariffs create a barrier to that," P&G spokeswoman Jennifer Corso said.

In its letter, P&G explained how its complex global purchasing arrangements make it impossible to impose tariffs on China without negatively impacting U.S. companies and consumers. One example involves plastic hand pumps that dispense liquids.

“These plastic pumps are manufactured at facilities in China that are wholly owned by the supplier and are not state-owned enterprises,” Jackson wrote. “These pumps are critical to many U.S. businesses that are importing them to supplement their production in the United States of the liquids that are being sold and dispensed by these pumps.”

P&G said it would take 18 to 24 months and cost millions to move production of the plastic pumps to the U.S.

“Furthermore, finished product using the hand pumps are exported to markets in the Western hemisphere meaning that this tariff could undermine the competitiveness of U.S. exports,” it said.

P&G identified six different electric shaving products that would be impacted by the new tariffs, all of them made only in China.

“Production of the above small electrical appliances transitioned to China more than a decade ago and they are exclusively manufactured there, although the supply chain of components used in their assembly process is complex and covers multiple countries across the globe,” the letter said. “These groomers are either made by a Procter & Gamble affiliate or at third party unrelated suppliers, and their development is not based on cutting-edge technology.”