The topic of tariffs is one that is dominating conversations across the housewares landscape as retailers and suppliers work to develop solutions to deal with looming price increases that are expected to touch nearly every segment in the industry.
While suppliers of products made in China continue to express concerns about the impact of the 25% tariffs that are expected to be implemented by the Trump Administration later this year, there is a possibility that companies that manufacture products in the United States could see some additional selling opportunities as a result.
Following the implementation of 10% tariffs in September of 2018, the Administration delayed an increase to 25% on $200 billion worth of Chinese imports that was expected at the start of 2019. While this gave housewares suppliers that import products from China some relief temporarily, the bump to 25% was eventually put in place in May.
With trade negotiations between the U.S. and China at an impasse as of press time, Trump is now threatening 25% tariffs on an additional $300 billion worth of products made in China, which also covers a host of housewares categories.
How product suppliers and retailers manage the additional costs as a result of the tariffs remains a talking point across the housewares industry. While there are few definitive answers about how to handle the increased costs resulting from the tariffs, the possibility exists that companies which have manufacturing operations in the U.S. could see additional opportunities to sell products to retailers.
As of now, many suppliers across several product categories with domestic manufacturing operations said there has been added interest in their products from retailers.
“Those conversations are definitely already taking place, and they are bilateral in nature,” said Jenny Dalquist, svp/sales and marketing with Nordic Ware. “The more forward-looking retailers are proactively approaching us to make plans, and in the instances where we are broaching the topic with a retailer, they are highly receptive— and appreciative— of having a domestic source for products.”
Mike Evans, president and CEO, Bush Furniture, said the company is reviewing its product lines, processes and sourcing, which could include expanding manufacturing efforts at its Jamestown, NY, facility. However, he noted that the fluid nature of the tariffs issue could have an impact on any changes now being discussed.
In addition to conversations that companies such as Nordic Ware are having with its retail customers, and the efforts of others such as Bush to review their operations, some retailers are being proactive in finding and boosting those companies that manufacture in the U.S.
Recently, Walmart invited more than 500 entrepreneurs to its Bentonville, AR, headquarters to take part in its 6th annual Open Call event. Held in mid-June, invitees met face-to-face with Walmart buyers that are looking for new U.S. manufactured products to carry in stores and on Walmart.com.
“In 2013, Walmart made a commitment to help boost job creation and U.S. manufacturing through buying an additional $250 billion in products supporting American jobs by 2023,” said Cindi Marsiglio, vp/merchandising services and U.S. manufacturing, Walmart. “Our annual Open Call is one way we continue to invest in this commitment while discovering new items that fulfill the needs of our customers.”
Expanding relationships with companies that manufacture products in the U.S. is one solution for merchants, but the conversations are still in the early stages. The great unknown facing suppliers and retailers remains knowing exactly which products will be impacted by tariffs and how long those tariffs will remain in place.
While importers of products from China have been actively searching for other overseas manufacturing sources in countries not impacted by tariffs, domestic suppliers— outside of talking with retailers— are largely taking a wait-and-see approach.
Housewares suppliers with U.S. manufacturing bases currently are leery of investing capital to expand their operations. Those that spoke with HomeWorld said they are unsure of the long-term benefits of adding production capabilities or expanding payroll should the U.S. and China reach a trade agreement that ultimately leads to the tariffs being lifted.
The current reluctance of domestic housewares suppliers to expand their U.S. manufacturing operations appears to be a similar mindset seen in recent months by companies in other industries. Employment figures covering the first five months of 2019 from the Alliance for American Manufacturing show a clear slowdown in hiring as it relates to manufacturing.
Through May, 14,000 jobs were added, which is inclusive of a decrease of 6,000 jobs in March. In 2018, there were 261,000 manufacturing jobs created in the U.S.
“Manufacturing job growth is clearly slowing,” said Scott Paul, president of the Alliance for American Manufacturing. “Economic expansions don’t last forever, but there are policy interventions that can boost demand and support new factory job creation. Now would be a good time to get a $2 trillion infrastructure plan back on track, and to secure a meaningful trade deal with China to rebalance that relationship.”
In addition, domestic manufacturers are not immune from the impact of tariffs. While products ranging from RTA furniture, to blenders and fans are manufactured in the states, many companies in these and other product segments source product components such as PC boards, batteries, hardware and glass from China. Those items and others have been subject to tariffs.
“While we agree with the President’s intentions to get China to open their country to our goods, it is not working for Wahl Clipper as some of the components that go into our products are made in China,” said Steven Yde, vp/marketing, Wahl.
The rub for Wahl, which has more than 1,200 employees in Illinois, is that while it faces increased costs for components needed to manufacture its assortment of hair clippers, trimmers and shavers, some of its competitors who make products overseas but not in China are not impacted by the tariffs.
That issue is one that has also been discussed by domestic cookware manufacturers. While finished cookware from China has yet to be subject to tariffs, U.S. producers have been dealing with higher raw materials cost as the result of tariffs on Chinese-made steel and aluminum.
Those tariffs not only increased the price of raw materials made in China, but led to price increases of U.S.-made steel and aluminum as well.