Lenovo Says It Will Hike Prices Of Products To Absorb US Tariff Fallout

Reuters reported that China’s Lenovo Group, the world’s largest PC maker warns about the intended spike in product prices to absorb the imposed US tariffs by the Trump led administration. Its shares plummeted by 6.5% after this public warning.

The announcement by the US president concerning the 10% tariffs on all other products awaiting shipment from China to the US has led to uncertainties among all players in the tech industry. The products which include toys, TV sets, mobile phones and other gadgets would have their prices hiked so the companies can absorb the tariffs.

This news has affected the players in the tech industry with their shares tumbling. Apple Inc. has been the most hit by the decision. While the company struggles to make profit due to the high cost of its products, the US government is increasing tariffs. Even though the company made a decision to likely retain its current price in order not to scare its customers, in latter months, the company might add a minimum of $75 per smartphone.

Lenovo has issued a warning beforehand. The US president revealed this week that he would postpone the imposition of additional 10% tariff until December. However, the decision does not affect Chinese-made desktops. Theirs would take effect in September. Lenovo Chairman Yang Yuanqing said on Thursday that the “retail prices for products like PC and smartphones will increase if US tariffs increase.”

He also mentioned that moving the manufacturing company from China to some other place to dodge the US tariffs is a slow and expensive process which would ultimately lead to an increase in product prices.

After falling in profit for two consecutive quarters, some manufacturers learned to frontload shipments, making the global PC market surge by 1.5% in the June quarter.

The Chinese PC maker emerged the biggest winner of the global PC market’s surprise rebound in the second quarter with a record of 25.1% market share in the quarter. Among the top five manufactures of PC, Lenovo made a remarkable improvement in its product mix, helping the business attain a profit pre-tax margin of 5.4%.

The company generates more than three-quarter of its total revenue from sales of PCs and mobile phones, which surged by 5%. The sales of its personal computers and smart phones rose by 12%, while its mobile business group sales plummeted by 9%.