How Trump’s tariffs are affecting the furniture industry

For the past eight years, San Francisco-based furniture designer Ted Boerner’s Thicket coffee table has been a reliable seller and a foundation for his livelihood. Inspired by Northern California’s redwood forests, it has modern lines, an oval glass top, and a base made of richly patinaed steel. Come March of this year, the perennial piece’s future was suddenly in jeopardy.

The Trump administration’s announcement, on March 1, of proposed steel and aluminum tariffs caused steel prices to rise and supply to shrink—destabilizing the market via a hint of uncertainty, but no actual implementation.

Boerner’s Los Angeles fabricator had to start sourcing raw material from a new source. There was no guarantee that the metal would receive its patinated finish, as it had in the past—since electroplating involves precise chemistry, and the exact composition of steel affects the results—and Boerner, whose three-person studio makes pieces to order for high-end clients and retailers like Design Within Reach, couldn’t gamble on quality or consistency. In order to make it work, he had to redesign the piece, invest in more product development, find new fabricators, and switch to powder coating, since it’s a “more forgiving” finish than plating and easily replicable by more vendors.

“Every decision I make comes down to some sort of material,” Boerner tells Curbed. His design and supply chain were affected not as a result of new policy, but just by the mere mention of tariffs. “We’re just now getting back into production. All the steps we have to do just because of a reaction to the market... For a small company, that’s a lot of money and we have to scramble.”

From independent studios to large-scale manufacturers and mass retailers, the furniture industry is already feeling the effects of tariffs, even if they’ve yet to be levied. Potential material shortages, rising manufacturing costs, slimmer profit margins, higher retail prices, and a general state of unease are forcing some American designers to evaluate their long-term design and manufacturing plans.

Why did Trump impose tariffs?

The Trump administration’s trade policy has vacillated since it began seriously discussing tariffs—another word for taxes—on metals in February. The reasoning behind tariffs is to make imported goods more expensive in order to, hopefully, stimulate the American manufacturing industry and protect American intellectual property, discouraging the production of counterfeit goods.

In the weeks after, the administration said it would exempt some trading partners (Canada, Mexico, and the European Union), but walked back on those claims. It officially began levying tariffs of 25 percent on all steel imports and 10 percent on aluminum imports on May 31.

The European Union quickly announced its own tariffs on goods it imports from the United States, like motorcycles and bourbon, in response to the U.S. metal tariffs. Canada said it would levy its own tariffs on American products, too, and began taxing imports of ketchup, beef, and whiskey, among other items in July. To appease some trading partners—like Argentina, Brazil, and South Korea—and avoid more retaliation, the Trump administration decided to enact import quotas in lieu of tariffs.

Meanwhile, the administration has been negotiating vague trade deals and granting subsidies to businesses negatively affected by tariffs—moves that have cast more uncertainty into the global market for raw materials and goods.

It’s not just raw materials tariffs that are affecting the furniture industry. In April, the Trump administration proposed a 10 percent tariff on over $50 billion worth of imports from China, which included 1,300 product categories, such as medical equipment, televisions, machine tools, and dishwashers. In July, the Trump administration increased the tariff amount to 25 percent and expanded it to $200 billion worth of goods, including consumer products like housewares, furniture, food, and apparel. Soon after, China announced retaliatory tariffs.

The United States Trade Representative’s office is accepting feedback on the consumer-good tariff proposal until the end of August, when it will hold a public hearing. Afterward, it might change the tariff’s terms, revise what’s included, and grant exemptions.

Between the tit-for-tat tariffs, the constantly changing terms, and numerous side deals, the only constant in the trade disputes is volatility—and that’s negatively impacting the furniture industry.

“It’s like the famous John Muir quote: ‘When one tugs at a single thing in nature, he finds it attached to the rest of the world,’” Boerner says. “Just replace ‘nature’ with any product you can think of.”

“It’s a never-ending bad loop we’re generating.”

When the Trump administration levied its tariffs, it claimed they would benefit American manufacturers and boost employment in the manufacturing sector. The opposite has been true for Emeco, a furniture company that has manufactured 100 percent of its products in the U.S. since it opened in 1944. Its best-known design is the Navy Chair, a piece made entirely from aluminum using a proprietary 77-step manufacturing process.

Eighty percent of the aluminum in Emeco’s chairs comes from recycled material generated in the United States. The company’s CEO, Gregg Buchbinder, thought the tariffs wouldn’t affect him since he manufactures in America, using American metal. However, as soon as news about tariffs broke, manufacturers began stockpiling materials in anticipation of higher prices. The resulting market shortage spiked prices, since suppliers knew their customers were suddenly in a bind. Emeco did the same, stockpiling material, but paid 17 percent more than usual for its aluminum.

“When the tariff discussion began, immediately, things changed,” Buchbinder tells Curbed. “I was talking to someone in our purchasing department. They said, ‘Aluminum has gone up.’ I said ‘How is this possible? Tariffs haven’t gone up yet.’ Our supplier is maxed; they’re at full capacity, and with that, they’re able to garner higher prices.”

The price bump on Emeco’s main material has affected production: The company’s typical lead time for an order used to be four weeks. Currently, it’s 12 weeks. For the time being, Emeco isn’t raising prices—a single Navy chair’s retail price is $560—and is absorbing the additional manufacturing costs.

“We can’t tell someone it’s now going to take 12 weeks and raise prices—we’ll lose business,” Buchbinder says. “It’s a never-ending bad loop we’re generating.”

The tariffs also hurt Alcoa, the 130-year-old aluminum manufacturer supplying Emeco’s metal. While Alcoa is based in the United States, it mills raw material in Canada and has to import it back into the country for its American customers. Alcoa’s chief financial officer estimated Trump’s 10 percent tariffs would lead to an additional $14 million of expenses every month.

Since the Navy chair is a classic design and is made in a very particular way using specific machinery, Buchbinder has no intentions of changing it. But the tariffs are affecting his long-term thinking. The company releases a new product every year in collaboration with famous contemporary designers like Frank Gehry, Jasper Morrison, and Philippe Starck. Research, development, and investment in new tooling amounts to about $1 million per new release. Buchbinder is weighing the cost it takes to bring a product to market against what furniture buyers are willing to pay.

“At a certain price point, our sales volume goes down and it won’t be feasible,” Buchbinder says.

Another manufacturer, the office-furniture behemoth Steelcase, increased prices in June for the second time in four months, due to multiple factors, including tariffs and inflation. Unlike companies that can competitively bid multiple metal manufacturers, Steelcase relies on very specific formulations for some of its products.

Steelcase

PolyVision, one of its divisions, makes a porcelain-enameled steel for whiteboards, which requires specific raw steel. According to spokesperson Audra Hartges, PolyVision wasn’t able to find an domestic manufacturer without compromising quality and price. The company filed for an exclusion for steel imported from Japan, which was granted on June 20.

“We remain optimistic about a similar exclusion we filed for European steel,” Hartges tells Curbed. “Despite this positive news, there remains uncertainty about long-term effects of these tariff on the global economy. In response to quickly rising steel prices and other commodity costs, we implemented a list price adjustment last month.

“There was an immediate panic in the marketplace”

While large brands have capital, stockpiles of inventory, a cushion for economic ebbs and flows, and legal departments that can attempt to negotiate directly with the U.S. government, small businesses are leaner and feel the effects more acutely.

“Please file raw materials and trade wars under ‘Things they don’t cover in design school,’” says Eric Trine, a designer based in Long Beach, California.

Trine’s brand, Amigo Modern, creates modern wire-frame furniture in Los Angeles County and sells wholesale to small boutiques, direct to consumers online, and through a partnership with West Elm. As soon as metals tariffs were mentioned by the Trump administration, Trine’s vendors, most of whom have been open at least 50 years, raised their prices.

“There was an immediate panic in the marketplace,” he says. “Part of running a smart business is figuring out ways to creatively handle these situations, but it’s the looming stress of it all—not knowing what’s going to happen—that’s hard to manage.”

The price for Trine’s vendors paid for raw materials rose between 20 and 30 percent. In June, a vendor quoted Trine $6.20 for a single part; a week later the price rose to $11.20. Some of his manufacturers haven’t raised their prices, but they have increased their minimum order sizes so Trine has to purchase more units per run, which puts pressure on cash flow.

Trine developed five new products this year; they have the same material composition as his existing collection—typically powder-coated steel—but with the increases in material prices, they will cost almost double the price to make.

“The problem is, when something increases $5 on the manufacturing level, it’s $20 at the retail level,” Trine says. “And when we are talking about pieces that retail around $100, that’s a major difference.”

Because of the volatility in pricing, Trine can’t accurately predict how much it will cost to produce his pieces in the future. He decided to pull out of a trade show, where he typically inks wholesale deals with retailers, because he can’t tell them how much a unit will cost.

Recently, Trine began developing a geometric plant stand with West Elm’s Local program, an incubator for independent American-made design with whom he’s had a fruitful four-year-long relationship. (About 25 percent of Trine’s sales are through West Elm.)

West Elm set a retail price of $165 for the plant stand. The wholesale price, typically half of retail for Trine, came to $82.50. The lowest quote Trine received from a local manufacturer was $52.20 per unit, and once he factored in packaging costs, he was looking at only a $25 profit per unit. He had to make the call to sacrifice a decent profit in order to move forward on the new collaboration.

Amigo Modern

“Typically, for a keystone markup, I’d take my costs, double it, and then double it again,” Trine explains. “So $57—including packaging—to $114 wholesale means $228 retail. But that’s just way too expensive in the West Elm assortment. They could likely get this made overseas for $15 a piece.” (West Elm declined to comment on the effect of tariffs on its business.)

Despite the recent struggles, Trine believes the market will return to normal levels and is committed to making his products locally.

“[Y]ou can produce high-quality products anywhere on the globe,” he says. “Just because a product is made domestically doesn’t mean it will be quality. There’s a lot of crap that’s made in the USA. But at the end of the day, business is not just about bringing a product to market, it’s about the entire system of relationships that sustain and support bringing that product to market. Domestic production is a commitment to invest in the domestic production community—we’re all in this together.”

Derek Chen, founder of the San Francisco-based design studio Council, is also experiencing difficulties related to metals sourcing. But unlike Trine, he’s contemplating moving some of his fabrication from the United States to overseas. The tariffs have forced him to rethink how and where he manufactures partly due to high costs of fabrication stateside and partly because of instability in the market.

“Things change so fast, and it’s hard to tell what’s real and what’s just our president talking out of his ass,” he tells Curbed. “So it’s hard to make decisions based on something that may change tomorrow. Some decisions are already made for us. One of my suppliers decided to just shut their doors. So I’m looking for a new supplier for metal chair frames, possibly overseas.”

But not everyone is experiencing pressure from the global trade disputes. Egg Collective, a high-end furniture company based in New York, hasn’t felt effects from the tariffs or from discussions about them.

“We have not seen any of our vendor prices go up yet, and I haven’t heard anything from colleagues either,” cofounder Hillary Petrie tells Curbed. “We have one current client in Canada who ordered a few months back and is now wondering what will happen when her pieces get delivered. Higher duties and taxes, maybe? But we don’t have any solid intel on that yet.”

“Prices change weekly and we’re constantly struggling with our vendors to maintain our margins”

American design brands that manufacture overseas are feeling the tariff pressure, too. In this case, the proposed tariff is on imported consumer goods, which was originally proposed at 10 percent on July 11 and has since climbed to 25 percent as of July 31.

Good Thing, a design brand based in New York and Toronto, currently manufactures about 90 percent of its products in China. The brand’s offerings include furniture, lighting, textiles, and home accessories sold around the world places like the MoMA Store, the Cooper Hewitt Shop, the Conran Shop, and YLiving. Cofounder Jamie Wolfond, who trained as an industrial designer, tells Curbed that manufacturing prices have always fluctuated because of supply and demand. Tariffs are an added pressure.

“Leading up to Chinese New Year, for example, the cost of cardboard skyrockets and a package that typically costs us $1 to make could end up costing $3 or $4,” he says. “The same is true of raw metal, particularly aluminum. These prices change weekly and we’re constantly struggling with our vendors to maintain our margins.”

The import tariff hasn’t affected Good Thing yet, but Wolfond is already crunching numbers. A $1 increase in his production costs usually leads to a $4 to $6 increase in retail price, depending on the product. So a 10 percent tariff on a product that costs $50 to make would lead to a retail price that’s $20 or $30 more.

“It’s enough to have us worried, and actively looking for alternatives,” Wolfond says. “The scary thing, of course, is that increasing tariffs on our made-in-China products doesn’t make it any easier to make our products in the United States. The U.S. and Canada have lost so much of their manufacturing infrastructure and expertise that achieving quality domestically is almost impossible. When we started Good Thing, the mission was to make affordable objects locally. In spite of an exhaustive few years of trying, we couldn’t get consistent quality results from our vendors.”

For now, Good Thing is running with slimmer margins to avoid impacting its retailers and direct customers.

“The tariffs would likely result in consumers paying higher prices across the board”

Furniture is a $100 billion industry in the United States. According to the U.S. Trade Representative’s office, the value of furniture and bedding imported from China totaled $29 billion in 2016. A July 11 report on tariffs and the the American retail industry from Goldman Sachs stated: “The biggest negative surprise ... relates to furniture.”

In a written statement to Curbed, Andy Counts, CEO of the American Home Furnishings Alliance—a trade group that represents American furniture importers and manufacturers— mentioned that products on the proposed tariff list could impact over 500 parts or finished products that the vast majority of U.S. home-furnishings suppliers use, including fabric, leather, components, and fully built pieces:

These tariffs, in conjunction with other current cost pressures, could result in price increases to our retail partners and ultimately to the American consumer. The arbitrary inclusion of furniture related items on the proposed list of tariffs is unjustified. These tariffs will do nothing to address the stated goal of addressing U.S. concerns with China’s practices involving technology transfer, intellectual property, and innovation.

Herman Miller, the Grand Rapids-based manufacturer of office systems and design classics, is closely watching the metal tariffs levied by the United States and retaliatory import tariffs levied by the country’s trading partners, according to Greg Bylsma, Herman Miller’s president of North American Contract, who oversees operations for North America.

“The increase in steel and aluminum has had a material impact on our business,” he tells Curbed. “The tariffs proposed for September will cause a another significant increase to our cost structure.”

The company operates globally and tries to manufacture its products as close to where they will be purchased as possible, in order to better serve customers. It has manufacturing centers in the United States, the United Kingdom, China, India, and Brazil. The company’s costs continue to increase, its prices affected since the United Kingdom, Canada, and Mexico announced tariffs on products or components it ships to assembly plants in those countries. Herman Miller might adjust some of its practices—like the locations from which it sources its components and materials—depending on how future tariffs are actually levied.

Peter Hoffman

“We are reviewing our total costs of ownership and adjusting our value streams when it makes sense,” Bylsma tells Curbed. “Based on current policy and what we’re hearing, we have no plans to change our manufacturing processes. That said, we’re continuing to monitor closely and develop contingency plans.”

Mass furniture brands usually import a significant portion of their products from overseas. Restoration Hardware, for example, imported 40 percent of its offerings from China in the 2017 fiscal year. In a July 13 statement, the company said it expects to reduce Chinese imports to 35 percent in FY18 and then to somewhere between 25 and 30 percent in FY19; however, it noted that it’s basing these numbers on “highly preliminary” information from the U.S. Trade Representative that’s “likely subject to significant alteration over the coming months.” The statement mentioned possible price adjustments as a result of the tariffs, but believes negotiating with its vendors will offset the cost.

When Restoration Hardware issued the statement, the proposed tariff was only 10 percent, not 25 percent, as it stands now; a spokesperson from the company declined to comment further to Curbed. Spokespeople from Target, Walmart, and Ikea also declined to comment on the effect tariffs will have on their businesses.

“We expect that all furniture retailers will be equally impacted by the proposed tariffs given the similar level of imports received from China for all companies,” a spokesperson from the online retailer Wayfair told Curbed. “The tariffs would likely result in consumers paying higher prices across the board. We will need to continue to wait to see if the proposed tariffs will go into effect in the coming months.”

Fewer knockoffs—and less exciting design?

While the tariffs have impacted the furniture industry negatively, Emeco’s Gregg Buchbinder sees a positive angle: he thinks they might reduce knockoffs from entering the United States, which speaks to the intellectual property protections the Trump administration claims tariffs will lead to. Through a program with the advocacy group Be Original Americas—which promotes original design and fights knockoffs—he registered the Navy chair with U.S. Customs and Border Patrol (CBP), which monitors imports, to familiarize agents with the design. Since Emeco manufactures in the United States, anything imported into the United States that resembles the Navy chair is a knockoff.

“Virtually all the knockoffs of our chair are coming from China,” he says. Manufacturers of counterfeit products already risk seizures from Customs, and if tariffs make imports more expensive, it might not be worth the risk. In 2017, CBP seized $15 million worth of knockoff furniture. However, relatively few manufacturers have registered their products with this program.

Throughout the tariff discussion—for all types of goods and foods and materials—the impact has been discussed in terms of costs at the scale of billions of dollars and hundreds of thousands of jobs lost—numbers that are so staggeringly large that they feel incomprehensible. That’s one way to measure impact.

Furniture is a commodity, an investment, and a source of livelihood. It’s also an outlet for creative expression by buyers, designers, and shoppers. Tariffs threatening artistic vision is especially frustrating for Boerner. Are we losing individuality because of a trade war?

“The other question that comes up is how do you make design distinctive? How do you keep it unique?” he says. “Our plated pieces had patina that gave us our unique stamp and artisanal hand touch. Powder coating doesn’t have that aesthetic. Crate & Barrel can powder coat. Ikea can powder coat. If we powder coat [too], does it diminish our value?”

As policymakers weigh the future of tariffs, these uncertainties will endure—and the furniture market will run with them.