- Best Buy intends "to be actively engaged" as the U.S. government seeks input on the latest round — list four — of proposed tariffs that could hit the electronics industry especially hard, company CEO Hubert Joly said on the first quarter earnings call this week.
- Best Buy had planned in its fiscal 2020 guidance for the list three tariffs to increase from 10% to 25%, which happened earlier this month. This list impacts about 7% of its total annual cost of goods sold (COGS), Joly said.
- "While we understand list four as proposed is comprised of many consumer items, including many electronics, we think it is premature to speculate on the impact of further tariffs as it is unclear whether list four will actually be implemented, what products would ultimately be included, at what rates and when," he said.
Joly did not elaborate on the company's plans to engage the Trump administration on tariffs. The proposal to implement a tariff up to 25% on $300 billion worth of Chinese goods is currently open for public comment where it has so far received 83 comments. June 17 is the final date to submit public comments and the day a public hearing will be held on the matter at the U.S. International Trade Commission.
The Consumer Technology Association estimates electronics make up more than half of the $300 billion total in this latest list. The list four tariffs would result in higher prices for consumers, Joly said. "We will, of course, continue to work to minimize the impact of the trade negotiations on U.S. consumers," he said.
Best Buy CFO Corie Barry said the retailer wasn't sure what percentage of its COGS would be impacted by this proposed list. "So I think the trick with list four is that it hasn't ... been defined," Barry said. "It hasn't even got into place yet."
Joly said the company is more focused on being part of the discussion process than on forecasting the impact of the list.
Best Buy has seen its suppliers deal with list three tariffs in a variety of ways, Barry said. Some have absorbed the cost to retain business, others have looked to shift their supply chains away from China, while others have simply had to increase their costs, she explained.
One of the big items affected by the list three tariffs was washing machines. But Best Buy didn't see a big hit from this increase, and Barry said this has to do with the reason consumers decide to buy a washing machine.
"The hard part is, I would not try to drive comparisons with that category because that's a category, you go buy a washing machine because of duress or need and it doesn't have the same elasticity as some of the other products that we sell," Barry said.