GE CEO says China tariffs' 'gross cost' could be $400 million

FILE PHOTO: General Electric CEO John Flannery is seen at the company’s office in New York City, U.S., June 26, 2018. REUTERS/Alwyn Scott

NEW YORK (Reuters) - General Electric Co, a major buyer of Chinese goods, estimates new tariffs on its imports from China could raise its costs by $300 million to $400 million overall before steps to lessen the impact, Chief Executive John Flannery said on Friday.

In comment on the tariffs set up by President Donald Trump, Flannery said GE imports about $2.9 billion worth of goods annually from China, roughly 10 percent of total its imports. The cost of the tariffs “could be $300 to $400 million at a gross level before any mitigating factors,” he said.

GE said it can lessen the costs by shifting to suppliers in other countries and by using “duty drawbacks” that provide refunds on duties paid on goods that are later exported.

Flannery said such drawbacks “could mitigate half or more” of the tariff costs. Adjusting GE’s supplier network to avoid tariffs could happen “over time,” he added.

“We don’t see a major impact yet financially, certainly not on our 2018 guidance,” Flannery said on a conference call with analysts after GE released second-quarter results.

But he added, “we have a massively global business in every sense, both with the customers, supply chains, everything.”

Some analysts took the remarks to mean GE could be hit with half of the $300 million to $400 million estimated cost, helping to fuel a 4.5 percent drop in GE shares on Friday.

Reporting by Alwyn Scott; Editing by Nick Zieminski