Tariff Quote Watch: Honeywell’s Harbinger of Tariff Troubles for Caterpillar and Deere — Panjiva
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Tariff Quote Watch: Honeywell’s Harbinger of Tariff Troubles for Caterpillar and Deere

China 1761 Industrials - Capital Goods 266 Tariff Quote Watch 92 Tariffs 1172 U.S. 3306

Capital equipment manufacturer Honeywell has flagged that the section 301 duties applied by the U.S. against Chinese exports, and resulting retaliation, could have a marked impact on its ongoing operations. Honeywell’s CFO, Gregory Lewis , has stated:

We expect the impact to be minimal and manageable in 2018 as we previously discussed, but now anticipate that the impact of 2019, prior to mitigation actions, will be significant.” (transcript via S&P Global Market Intelligence).

Mr. Lewis also indicated that the cost of duties in 2019 – including the so-called “list three” duties that were enacted on September 24, as outlined in Panjiva research of September 28, could amount to “hundreds of millions of dollars”. The impact on earnings will depend on the company’s ability to pass-through the cost of tariffs to customers. Additionally the firm is “not going to see us make big overhauls to the supply chain”.

The challenge to Honeywell’s U.S. supply chain is significant. Panjiva data shows Chinese supplies accounted for 53.9% of the firm’s seaborne imports to the U.S. in the past 12 months.

Furthermore all its top five industrial supply chain products (jet engines/parts, gas pumps, electrical cabling, control instruments and construction machinery parts) accounting for 2,589 TEUs in the past 12 months and its top two commodity items (vulcanized rubber components and aluminum fasteners) have all been hit by duties in either the most recent or earlier two rounds of section 301 duties.

HONEYWELL’S IMPORTS RELY ON CHINA FOR MOST PRODUCTS

Chart segments U.S. seaborne imports by Honeywell by product (HS-4) and shipment origin for the past 12 months, denominated in TEUs.   Source: Panjiva

Honeywell will be far from the only company that faces such challenges and attempt to apply such mitigation. Other major importers of Honeywell’s top five industrial supply chain products from China include Komatsu (2.92k TEUs in the past 12 months, due to report October 29), Caterpillar (590 TEUs, October 23), Deere (405 TEUs, November 21) and Ingersoll-Rand (390 TEUs, October 24).

KOMATSU, DEERE AND CAT’s EXPOSURE SIMILAR TO HONEYWELL

Chart segments U.S. seaborne import shipments including five industrial products (by HS code) by product and company (U.S. stock ticker) in the past 12 months, denominated in TEUs.   Source: Panjiva

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