U.S. Furniture Business Impacted By US Tariffs On Chinese Imports

The furniture market and the industry in the United States has been badly hit by the imposition of import tariffs – and which was subsequently increased from 10% to 25% earlier this month, on Chinese goods which also included imported furniture from China. .

A section of furniture retailers, wholesalers and manufacturers had decided jointly to absorb a part of the increase in costs after the imposition of 10% tariffs on furniture and other Chinese goods in September by the US president Donald Trump.

For example, about 5% of the 10% tariffs on furniture that it imported from its factory outside Shenzen in China was absorbed by the reclining chair and sofa maker Manwah Holdings. This company ships furniture worth about $470 million annually to large U.S. furniture retailers.

Now Manwah has restarted negotiations with retailers after raising of tariffs to 25%. “Manwah has committed to additional tariff relief dollars but the amount will be based on an individual conversation with each of our customers,” said company spokesman Kevin Castellani to the media. However only big factories and purchasers are typically are the targets of such offsets and a large number of companies in the $114 billion U.S. retail furniture industry are finding it hard to adjust the sudden and significant increase in costs of furniture imported from China

According to an analysis by investment banking and advisory firm Mann, Armistead & Epperson, imports from China last year into the US in the furniture industry for residential use comprised of $5.7 billion worth of wood furniture; $5.3 billion in upholstered furniture, $7.2 billion in “metal and other” furniture and nearly $1 billion in mattresses.

Following the denial by a Chinese manufacturer of leather chairs and sofas to provide some cover for the additional tariffs, an order for the same had to be cancelled by Jeff Child, president of Berkshire Hathaway’s RC Willey Home Furnishings, according to a report published in Reuters. Child had to cancel the 15-container order worth just over $300,000 after the denial by the Chinese manufacturer and after he realized that the increased costs of the furniture because of the tariffs would not work in any outlet of his 12-store chain. Child said that a number of his Chinese manufacturers absorbed half of the 5% hike in prices because of the 10% US tariffs but the extra 15% cost hike was more than they could afford. “It’s a big bite for them too,” Child said.

Some US furniture companies have tried to look beyond China for sourcing furniture. For example, the size of its factory in Vietnam is being increased by more than 100% by Manwah resulting in shipments of 1,000 containers per month from the factory.

According to S&P Global Market Intelligence’s trade data firm Panjiva, in the first quarter of the current year, there was a drop of 13.5% in the import of Chinese-made furniture into the US by retailers such as IKEA, Home Depot Inc and Target Corp. On the other hand however, there was an increase of 37.2% of increase in shipments from Vietnam and a 19.3% rise in furniture import from Taiwan. These two increases have been able to partially offset decrease of imports from China.

(Adapted from Reuters.com)

Categories: Creativity, Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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