The recent announcement that tariff exclusions are being extended through the end of the year on some Chinese-made furniture items is probably welcome news for those resources still importing those items from that country. After all, a reprieve on 25% tariffs is a huge savings of costs that many are having to eat, especially if they are trying to minimize or eliminate the added costs for their retail customers. By doing so, they also remain competitive in the marketplace because China still affords looks and price points that – even with the added costs – continue to make China a value in the marketplace.
This point came across loud and clear from proponents of extending the exclusions. In their online testimony to the U.S. Trade Representative, many noted that these are products aren’t immediately available in other countries. Shifting sourcing would complicate matters as it would take months, if not years, for those countries to get up to speed in producing similar goods. This, they argued, not only hurts retailers, but also hurts their customers by offering products that don’t meet the same quality/value standards. In addition, particularly for youth and baby furniture, shifting sourcing could result in quality issues that translate into unsafe products.
But for some other companies, including those that have been doing business in Vietnam, Malaysia and India – or that have recently shifted sourcing to those countries – the exclusions don’t mean much. China for them is no longer as important a resource as it once was. And having already made the transition, they argue, they are well-positioned to compete against China.
None of this is to say that furniture manufacturing won’t return to China in the future, particularly if tariffs are ultimately lifted altogether. In fact, it remains our No. 1 trading partner in furniture, with more than $9.7 billion in wholesale shipments last year. While down significantly from the year before, that’s a number that will be hard even for its next closest competitor, Vietnam, to match anytime soon.
Still, for some companies, China is a risk at best, which is why they continue to reduce their presence there. Even with exclusions in place until year end, uncertainty remains. In the coming months – unless tariffs are lifted entirely, and that’s a big if based on the current political and economic climate with COVID-19 – more industry officials will continue to push for extensions beyond 2020.
Will that happen or not? And how does this impact plans for future sourcing? As always we would love to hear from you. Feel free to share your thoughts with me at email@example.com. Or feel free to call me directly at (336) 508-4616.
I’m Tom Russell and have worked at Furniture/Today since August 2003. Since then, I have covered the international side of the business from a logistics and sourcing standpoint. Since then, I also have visited several furniture trade shows and manufacturing plants in Asia, which has helped me gain perspective about the industry in that part of the world. As I continue covering the import side of the business, I look forward to building on that knowledge base through conversations with industry officials and future overseas plant tours. From time to time, I will file news and other industry perspectives online and, as always, welcome your response to these Web postings.