The United States Trade Representative (USTR) has continued its Section 301 tariffs against China, which experts in the furniture industry say could cause ripples throughout their industry.
Section 301 tariffs are taxes imposed on American imports from China due to the perception from the government that some Chinese practices are "unreasonable or discriminatory, and burdened or restricted U.S. commerce," according to the Congressional Research Service. These tariffs were imposed in 2018, but many business owners assumed that the Biden administration would lift the tariffs at some point during his presidency. However, now that the tariffs are in place indefinitely, members of the furniture industry are concerned that the high cost of importing materials could burden their already weakened systems further.
Declining demand and frequent order cancellations have plagued the furniture industry recently, says a report from Furniture Today, and slowed consumer spending on furniture has been devastating for a few key players. Furniture and home goods giant Bed Bath and Beyond announced this year that they would close 150 stores and eliminate 20% of their employee base in an attempt to conserve their finances. After their Chief Financial Officer Gustavo Arnal suddenly passed away on September 6, 2022, shares fell sharply, and the company was left floundering. Additionally, La-Z-Boy is closing their Newton, Mississippi, upholstery manufacturing plant, letting 180 workers go in the process. This is not the first time they've threatened closure of this particular facility; in June 2020, the factory almost shut down but was reopened in October 2020 due to rising demand. Lastly, Wayfair announced in August that they are cutting 870 employees from their global workforce – more than 10% of its corporate team. This comes after their Quarter 2 earnings in 2022 were down nearly 15% from the previous year for a net loss of $378 million.
Experts from Furniture Today say that compounded with inflation, freight price increases, and supply chain issues, tariffs are partially to blame for the furniture industry's downturn. While they may be at the bottom of the "daily headache list," Editor in Chief Bill McLoughlin says, they still profoundly impacted the global sourcing environment, and many companies have not adjusted to the increased cost.
