Industry resources react to prospect of North American tariffs

Companies that manufacture in Mexico and Canada would face higher costs that could be passed along to consumers

WASHINGTON — The imposition of additional tariffs on Canada- and Mexico-sourced products including furniture could have a far more disruptive impact on North American trade than anyone in the incoming Trump administration realizes.

That’s particularly true in the furniture industry, which imported some $3.2 billion and $2.2 billion respectively from Mexico and Canada, according to Mann, Armistead & Epperson’s latest household furniture import study. With each country also respectively representing 10% and 6.7% of furniture shipped to the U.S., a proposed 25% tariff could have an alarming impact, raising the wholesale value of goods to $4.0 billion for Mexico and $2.75 billion for Canada.

Much, if not all, of that cost would be passed along to consumers, possibly making the average annual 5.2% inflation rate during President Joe Biden’s years look miniscule by comparison.

Some Canadian manufacturers and exporters from Canada declined to be quoted for this story, including Palliser, which produces upholstery in both countries. Another wood furniture manufacturer also declined to comment on the record other than to share concern about the issue, particularly on the challenges tariffs could present in selling to the U.S. market. Both companies also said they are keeping a close eye on the issue and planning ahead to address any potential fallout.

Canadian upholstery manufacturer Decor-Rest Furniture told Home News Now that it has issued a letter to its customers that is intended to alleviate their concerns.

“This is to let them know there will be zero duty for the first six months of anything happening, to make everybody feel at ease and comfortable,” said Angelo JR Marzilli, president and chief executive officer. “They will have a six-month transition when and if something were to come in. Which means we will take the entire burden of all of this riffraff, call it, and we will look after it ourselves so that there is no business interruption between now and then. It will give our customers six months to make a change, should it come to that.”

With an estimated $500 billion in goods imported from Canada, ranging from oil and natural gas to electricity and lumber, Canada remains one of the United States’ largest trading partners. Mexico is also important, shipping more than $529 billion in goods to the U.S. compared to China’s estimated $450 billion, according to the Congressional Research Service.

China also is target of increased tariffs, facing as much as 10% higher than the current 25% imposed on many products including some furniture.

But the prospect of tariffs on neighboring North American countries is what is of issue to those furniture companies manufacturing across the border to the north and south.

“$500 billion is a massive amount of trade for these two countries that are neighbors,” Marzilli said. “I think it’s going to be more of a global phenomenon if something like this were to happen.”

He noted that customers have initially been concerned over higher costs. But that is why the company issued its letter about holding off on tariffs for the first six months: to alleviate those concerns before people panic and allow them to get product sooner versus later.

“That gives us plenty of time — six months is a long time to get stuff on order,” he said.

Others have a manufacturing footprint in other countries that allows them to shift production if necessary. For example, while motion furniture specialist Man Wah has production in Mexico, it primarily manufactures product for the U.S. in Vietnam.

“We have different options,” said Gabriele Natale, president of Man Wah USA, noting that the Mexico plant serves the U.S. very little at this time. “We have a global footprint and we flex according to the needs. The one place we don’t have a production facility is the U.S., and we are looking at that option, too. The company will adapt to whatever comes up.”

Others questioned whether the tariffs will have the desired effect, which is to limit immigration in Mexico’s case and stem fentanyl imports from Canada. One source who asked not be identified, said that independent businesses should not be penalized for a problem that the U.S. should be handling on its own.

“Why am I responsible for keeping migrants and drugs out of your country? I thought that was your responsibility. All it’s going to do is punish consumers.”

“There are some problems that need to be fixed,” the source added. “There’s no question and I don’t think anybody’s arguing that now. But I don’t believe in going about it in a way that could be violently disruptive to the economy. There’s been this promise of lower prices, but I’ve got to tell you this is not how you are going to get lower prices for the American population.”

Others said they believe that Trump is starting with tariffs as a negotiating tool so that other countries would play a more active role in the solution, although they don’t expect things to improve immediately, even with tariffs.

Sergio Zorio, vice president of sales at Mexico case goods manufacturer Meximuebles, believes that Mexico remains competitive in spite of all the talk about tariffs, particularly because of its proximity to the U.S. market. Some customers, he noted, are looking to shift product away from China and are asking about expanding their business with the producer into other categories such as bedroom and dining in addition to home entertainment, for example.

“We have an advantage in that we can ship right away,” he said of the company’s 10-day lead times. “They can get it quicker and better priced.”

Some customers, he noted, are already placing orders to get product in advance of tariffs, although they are still buying only what they need.

Marzilli, of Décor-Rest, said it has not noticed any spike in orders of late because of the tariffs as many still see it as a negotiating tool.

“I think many people are now considering it a bluff,” he said, noting that most people agree that it’s important to close the borders to unlimited immigration, illegal drugs, guns, etc. … “We can all agree that he is dangling this to say, ‘Let’s do this or else.’ But I believe that we are all on the same page in that we should tighten up all of our borders because we are one unified continent, in my opinion. And we have always been. That’s what keeps us stronger than anywhere else in the world.”