How Trump’s tariffs are affecting the furniture industry

With the prices on products adjusting for the tariff increases, numerous companies wonder “How this will affect my organization?”. Below is an excerpt from an article by Diana Budds of Curbed.com which addresses the tariff impact on the office furniture industry.

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“The tariffs would likely result in consumers paying higher prices across the board”

Furniture is a $100 billion industry in the United States. According to the U.S. Trade Representative’s office, the value of furniture and bedding imported from China totaled $29 billion in 2016. A July 11 report on tariffs and the the American retail industry from Goldman Sachs stated: “The biggest negative surprise ... relates to furniture.”

In a written statement to Curbed, Andy Counts, CEO of the American Home Furnishings Alliance—a trade group that represents American furniture importers and manufacturers— mentioned that products on the proposed tariff list could impact over 500 parts or finished products that the vast majority of U.S. home-furnishings suppliers use, including fabric, leather, components, and fully built pieces:

These tariffs, in conjunction with other current cost pressures, could result in price increases to our retail partners and ultimately to the American consumer. The arbitrary inclusion of furniture related items on the proposed list of tariffs is unjustified. These tariffs will do nothing to address the stated goal of addressing U.S. concerns with China’s practices involving technology transfer, intellectual property, and innovation.

Herman Miller, the Grand Rapids-based manufacturer of office systems and design classics, is closely watching the metal tariffs levied by the United States and retaliatory import tariffs levied by the country’s trading partners, according to Greg Bylsma, Herman Miller’s president of North American Contract, who oversees operations for North America.

“The increase in steel and aluminum has had a material impact on our business,” he tells Curbed. “The tariffs proposed for September will cause a another significant increase to our cost structure.”

The company operates globally and tries to manufacture its products as close to where they will be purchased as possible, in order to better serve customers. It has manufacturing centers in the United States, the United Kingdom, China, India, and Brazil. The company’s costs continue to increase, its prices affected since the United Kingdom, Canada, and Mexico announced tariffs on products or components it ships to assembly plants in those countries. Herman Miller might adjust some of its practices—like the locations from which it sources its components and materials—depending on how future tariffs are actually levied.

“We are reviewing our total costs of ownership and adjusting our value streams when it makes sense,” Bylsma tells Curbed. “Based on current policy and what we’re hearing, we have no plans to change our manufacturing processes. That said, we’re continuing to monitor closely and develop contingency plans.”

Mass furniture brands usually import a significant portion of their products from overseas. Restoration Hardware, for example, imported 40 percent of its offerings from China in the 2017 fiscal year. In a July 13 statement, the company said it expects to reduce Chinese imports to 35 percent in FY18 and then to somewhere between 25 and 30 percent in FY19; however, it noted that it’s basing these numbers on “highly preliminary” information from the U.S. Trade Representative that’s “likely subject to significant alteration over the coming months.” The statement mentioned possible price adjustments as a result of the tariffs, but believes negotiating with its vendors will offset the cost.

When Restoration Hardware issued the statement, the proposed tariff was only 10 percent, not 25 percent, as it stands now; a spokesperson from the company declined to comment further to Curbed. Spokespeople from Target, Walmart, and Ikea also declined to comment on the effect tariffs will have on their businesses.

“We expect that all furniture retailers will be equally impacted by the proposed tariffs given the similar level of imports received from China for all companies,” a spokesperson from the online retailer Wayfair told Curbed. “The tariffs would likely result in consumers paying higher prices across the board. We will need to continue to wait to see if the proposed tariffs will go into effect in the coming months.”

Fewer knockoffs—and less exciting design?

While the tariffs have impacted the furniture industry negatively, Emeco’s Gregg Buchbinder sees a positive angle: he thinks they might reduce knockoffs from entering the United States, which speaks to the intellectual property protections the Trump administration claims tariffs will lead to. Through a program with the advocacy group Be Original Americas—which promotes original design and fights knockoffs—he registered the Navy chair with U.S. Customs and Border Patrol (CBP), which monitors imports, to familiarize agents with the design. Since Emeco manufactures in the United States, anything imported into the United States that resembles the Navy chair is a knockoff.

“Virtually all the knockoffs of our chair are coming from China,” he says. Manufacturers of counterfeit products already risk seizures from Customs, and if tariffs make imports more expensive, it might not be worth the risk. In 2017, CBP seized $15 million worth of knockoff furniture. However, relatively few manufacturers have registered their products with this program.

Throughout the tariff discussion—for all types of goods and foods and materials—the impact has been discussed in terms of costs at the scale of billions of dollars and hundreds of thousands of jobs lost—numbers that are so staggeringly large that they feel incomprehensible. That’s one way to measure impact.

Furniture is a commodity, an investment, and a source of livelihood. It’s also an outlet for creative expression by buyers, designers, and shoppers. Tariffs threatening artistic vision is especially frustrating for Boerner. Are we losing individuality because of a trade war?

“The other question that comes up is how do you make design distinctive? How do you keep it unique?” he says. “Our plated pieces had patina that gave us our unique stamp and artisanal hand touch. Powder coating doesn’t have that aesthetic. Crate & Barrel can powder coat. Ikea can powder coat. If we powder coat [too], does it diminish our value?”

As policymakers weigh the future of tariffs, these uncertainties will endure—and the furniture market will run with them.

Budds, D. (Aug 7, 2018.) How Trump’s tariffs are affecting the furniture industry.