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Fender Fends off Tariffs as Yamaha, Casio Miss a Beat

China 2908 Cons. Discr. - Durables 456 Tariffs 1769 U.S. 5216

Guitar manufacturer Fender Musical Instruments, maker of the iconic Stratocaster, has been fined £4.5 million ($5.9 million) for breaching U.K. competition rules regarding enforced minimum pricing, the Financial Times reports. The firm, which counts U2 musicians Bono and The Edge among its board members, has had to deal with an increasingly complex global supply chain for instruments, including the imposition of list 4A tariffs on U.S. imports from China.

As discussed in Panjiva’s research of Jan. 16 the phase 1 trade deal between the U.S. and China will cut back list 4A duties to 7.5% from 15.0% though that still adds costs to shipments which Fender will presumably want to pass on to consumers. That may test its pricing strategies in the U.S.

Panjiva’s data shows Fender’s pricing power may have allowed it to offset the impact of tariffs so far, with U.S. seaborne imports linked to the firm having climbed by 10.8% year over year in 4Q after a 17.3% rise in 3Q. Indeed, it has actually increased the share of imports from China to 56.1% in 2019 compared to 52.1% in 2018.

BRAND MATTERS AS FENDER TUNES OUT TARIFFS

Chart segments U.S. seaborne imports associated with Fender Musical Instruments by origin on a monthly and three-month average basis.  Source: Panjiva 

That resilience hasn’t been seen by the industry more broadly with U.S. imports rising 17.1% year over year in 3Q due to stockpiling, followed by a 8.8% drop in 4Q. For imports from China there was a 20.7% surge in 3Q and a 15.6% slump in 4Q.

China still represents the largest share of supplies with 57.3% of the total in 2019 from 57.5% a year earlier. Most shippers continued with their existing business mix. 

Diversified manufacturer Yamaha saw a 7.2% drop in shipments in 4Q after a 2.7% rise in 3Q, while China represented 47.5% of its imports in 2019 from 46.0% in 2018. Keyboard specialist Casio meanwhile was one of the worst performers with a 25.5% drop in imports in 4Q compared to a 21.9% slump in 3Q too – effectively all its imports are from China.

The outlier was professional-range keyboard maker Roland. The firm has seen a cut the share of China in its U.S. imports to 12.9% in 2019 from 46.2% in 2016, and actually saw a “reverse seasonality” with a 7.5% rise in imports in 4Q after a 6.6% drop in 3Q.

CASIO, YAMAHA VOLUMES DOWN, FENDER ROCKS ON

Chart segments change in U.S. seaborne imports of musical instruments by consignee / shipper.  Source: Panjiva 

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