Did you get a nice new TV over the holidays this year? Perhaps one of those fancy ones that comes with Wifi and internet access. Or maybe that new that that is so ultra widescreen that it’s virtually impractical to own. We know TV sales are big business with hundreds of millions sold every year. And while the frequency of sales has declined (most people that want shiny new TVs have them by now) there’s still a lot of flat glass being shipped around the world. So you might as well learn a bit about where your new window into the world came from.
Odds are that your TV came from Mexico. Mexico may have its fair share of problems but it has become a major exporter, especially of TVs. They get the parts from Asia, assemble in Mexico, and send over the border to the States. But we often think of Asia as being the TV makers. After all, most of the major brands are based in Asia. Why would they send parts to Mexico before importing them into the US? One word, or um, acronym: NAFTA. The free trade agreement between the US, Mexico, and Canada allows for the movement of goods between the countries without tariffs.
And while the US is all about free markets and was founded partially due to unfair tariffs, the US protects many industries today with them still. TVs imported from Asia come with such tariffs. But if the TV is assembled in Mexico, it can be sent to the US without a tariff.
That sounds like an awful lot of trouble to save on taxes. But anyone that’s worked at Best Buy can tell you that there’s no money to be made in TVs. I was once a lonely blue shirt myself and one of the great perks of the job (at least back then) was the employee discount. It was just a few percentage points above the cost of the item. So if Best Buy bought something for $500, I could have it for $550 whether they sold it to customers for $600 or $6000. But all the big ticket items had no profit in them. The discount on a $1000 TV would have been $15-$20. Accessories (like cables, speakers, and keyboards) and warranties are where the money is made.
The TV market is an interesting one. Every electronics manufacturer wants to be in the business, but there’s no profit in it. Because it’s so competitive, prices have been driven down basically to the cost to produce. TV manufacturers hope to make up for that in either sales volume or brand loyalty across their product lines. Samsung may be the only success story in that respect but you can’t say the success of their phones, computers, tablets, and refrigerators is based on their TVs.
So the TV makers try to make a little profit where they can on the TVs. Part of that is avoiding an import tariff to bring their TVs from Asia over to the US. That sounds a little silly but perhaps it’s not. Without NAFTA, those assembly jobs would not exist in the US. So we might as well have them exist just over the border in Mexico than in Asia. It’s better to support the economy of a neighbor than a “competitor” on the other side of the world.
Make sure you enjoy that TV. It’s cheaper because of NAFTA and better thanks to all the competition that existed for your money.