by Some hope that there still will be room for negotiation between the US and its northern and southern neighbors to help stem the financial burden
HIGH POINT —Do we have tariffs or not? That’s the big question the industry is facing, particularly related to planned tariffs on Mexico and Canada.
Regardless of the Trump administration’s inability to stick to a decision from one day to the next, manufacturers and importers are deep into negotiations and solutions of their own, trying to navigate the long list of customers that will or won’t be willing to pay for any type of increase whatsoever.
On Tuesday of this week, the 25% tariffs on each country went into effect, only in Mexico’s case to be delayed until April 2 as of Thursday. On Thursday, Canada also received a delay in the implementation of tariffs certain products, but it was immediately unclear if that affected furniture.
Regardless, the furniture industries in those countries are moving forward with plans to address the tariffs in ongoing communication with their U.S customer base, which is largely made up of large and smaller retailers alike. Some have already announced a mix of price hikes mixed with other concessions to help defray the costs.
Of course, this is going to be difficult given the extent of the potential double-digit increase, which Trump believes will solve issues such as illegal drugs crossing the border and illegal immigration, although many would disagree at least in private.
Conversations with sources that import from both countries said that in many cases, orders are on hold at the moment, at least until they get further clarity on the full impact, pending any further discussions or negotiations.
David Hips, national sales director for Mexico case goods manufacturer Woodica, said that the company has had discussions with customers stating that it will share half of the burden. Some retailers, he said, have agreed to share the other half.
But given that this will significantly cut into profits, he hopes that there is some reduction or further resolution between the two countries in the coming weeks.
Long-time partnerships the factory has had with its customers in the U.S. dating back nearly 20 years are helping to sustain business at the moment, he said.
Flexsteel Industries also acknowledged the challenges the industry is facing, particularly relating to what the final costs to customers will be.
“The situation is very dynamic,” said David Crimmins, vice president of sales and product management for Flexsteel, which produces much of its upholstery in Mexico. “We continue working many options, but are not jumping to conclusions based on Tuesday’s implementation.”
He added that the company will evaluate its next actions after “we see Sunday’s planned response from the Mexican government. We are still hopeful that our governments will make progress in negotiations and resolve this quickly.”
Others told Home News Now that they will determine what of any additional costs will be shared case by case as some customers are willing to help, while others simply aren’t.
Thus, for the time being, sources have said that orders with many manufacturers are on hold, although many hope there will be a resolution in the coming weeks that could lead to reduced tariffs.
Yet also complicating matters is the threat of retaliatory tariffs. It remains part of the equation that could further boost the cost of finished goods, particularly as raw materials flowing across borders are one of the most expensive parts of the product mix, following labor.
As these issues continue to play out in the discussions, industry executives like Luke Simpson, president of case goods manufacturer Durham Furniture, was reluctant to address exactly what its specific plan is moving forward, at least until the details are further ironed out in what looks to be turning into a long and painful trade war.
But one thing he noted is clear: Durham and most other manufacturers won’t be able to bear the full 25% cost increase on their own. In fact, with tight margins already, many have said that it’s economically unsustainable even over the short term as it will lead to significant quarterly losses.
Canadian manufacturer Amisco told Home News Now that it did not have any immediate comment as the situation is “evolving day to day and we are looking at different options.”
Samantha Mund, head of customer service and marketing at case goods manufacturer West Bros., said “The signing of this executive order, pausing tariffs until April 2nd on goods compliant with the Canada-U.S.-Mexico Agreement (CUSMA), is a much-needed relief for businesses that depend on the stability provided by this trade framework. The immediate impact will offer vital support to our industry, and we remain hopeful that this decision signals a continued commitment to upholding and strengthening trade agreements like CUSMA in the future.”
Some sources have told Home News Now that retailers have already been looking to other countries such as Italy for products such as leather upholstery, or even Turkey for value-priced upholstery and wood furniture. This was evident at the recently concluded Lofty Design Expo in Miami, where large and smaller retailers alike including Rooms To Go and El Dorado Furniture were checking out the mix of mostly Turkish manufacturers but also manufacturers from Brazil and a small number from China.
Others have said the situation is bolstering the prospects of manufacturers in Italy. For example, Mario Sforza, president of leather resource Incanto Italia, told Home News Now that many top retailers have been in Italy recently to search for new vendors “since Italian manufacturers are the true and real alternatives. In the upholstery industry, not only Vietnam and Malaysia or India are the alternative.”
In some ways, the situation also appears to bolster the prospects of domestic manufacturers of case goods and upholstery.
“At first glance, the lack of clarity in Trump’s tariff plans presents major challenges for companies planning their sourcing decisions,” the Reshoring Initiative said in a recent e-newsletter. “However, the mere threat of tariffs seems to be doing a sufficient job of defining the objective: The U.S. must boost domestic manufacturing to strengthen national security, reduce the trade deficit and support economic stability. And the Trump administration appears serious about making that happen. Regardless of how tariffs are implemented, the pressure is driving companies to rethink their supply chains and commit to localization.”
But even the shift to domestic sourcing could take time as many are still waiting for a final word not only on the trade situation in Mexico and Canada, but also in other countries where tariffs could also take effect in and outside of Asia.
“While the mere threat of tariffs could be enough to firm up some of the plans, many projects will only move forward when the tariffs are in place and likely to remain in place for at least the next four years,” the Reshoring Initiative noted.
Home News Now has also reached out to Canadian manufacturers including Palliser, Dorel, Prepac and El Ran, as well as companies that source product from Mexico, including Horizon Home, and is awaiting further response.
Dealers looking at India and Brazil missed the comments in Trump’s last speech to Congress. Trump specifically mentioned India and Brazil as the next targets for tariffs.