From Home Furnishing Business
Statistically Speaking: Tariff Stalemate Hurts Both U.S. and China
Following the G7 Summit last summer, many American companies remain in limbo, and at press time faced no definitive results regarding trade negotiations between the U.S and China. With looming dates for additional 10% tariffs on many Chinese furniture imports, already postponed from September to December, some furniture companies have turned to manufacturing in Vietnam. Imports from both Vietnam and Canada have gone up while China imports have decreased. While senior U.S. and Chinese officials have pledged to meet in October to settle the ongoing trade war, a continued stalemate would hurt both countries.
This month’s Statistically Speaking highlights the effects the current 25% tariffs have had on many furniture imports, using data from the U.S. International Trade in Goods and Services Report and the Bureau of Labor Statistics. For the consumer, trade wars elevate concerns about increases in furniture prices. Before this year, the Consumer Price Index for furniture fell gradually since 2012 from an average of 120.3 to 111.1 last year (1982 base year = 100). At press time, available data through August showed that furniture prices appeared to make a significant move upward in July facing the threat of increased tariffs then eased back in August as the international dance between the U.S. and China continued. The CPI for furniture climbed to 115.2 in July, then fell to 113.9 in August (Table A).
Prior to the Great Recession, U.S. imports peaked in 2007 at $41 billion for the broad import category that includes furniture (Table B). Since bottoming out at $30.1 billion in 2009, imports have grown to $67.1 billion in 2018 – a jump of 123%. However, in the first half of 2019, furniture and bedding imports are tracking to be lower this year. For the first and second quarter of 2019, imports were $31 billion compared to $32.4 billion in the first half of 2018. As shown in Table C, tariffs have historically hovered around 1.1% of furniture imports until 2018 when they increased to 2.3%. Since the first half of 2018, tariffs as a percent of furniture category imports climbed to 3.5% by the end of 2018 and up further to 5.7% in the second quarter of 2019.
Imports declined in the first half of this year compared to the same period last year for the first time since 2008 – falling 4.3% (Table D). Import growth had tapered down somewhat post-recovery from the recession before the dramatic drop this year. The first major increase in import tariffs began in 2018 – increasing from $660 million in 2017 to $1.5 billion in 2018. The big jump in tariff growth occurred between the first half of last year ($311 million) and the second half of this year ($1.8 billion) – a jump of 465.9%.
In 2018 the U.S. imported $67.1 billion in furniture and bedding goods and parts worldwide. Over half of those imports are from China, $34.8 billion in 2018, with Mexico, Vietnam and Canada trailing in the distance (Figure 1). Worldwide imports are on track to decrease in 2019 with imports from China taking the biggest hit. As of this year’s second quarter, imports from China are $14.3 billion compared to last year’s second quarter total of $16.5 billion. While imports from China decline, many companies are turning to Vietnam and Canada as alternate resources. Imports from Vietnam have increased from $2.3 billion in the first half of 2018 to $3 billion in the first half of 2019, while Canadian imports increased from $2.4 billion to $2.6 billion over the same period. Mexico import growth has stayed relatively flat.
As shown in Figure 2, the U.S. has mainly imported from China, followed by Mexico. Total Chinese tariff dollars for the first half of the year total $1.7 billion with trade agreements protecting many other countries, including Mexico who paid only $6.8 million.
Tariffs as a percentage of Chinese imports were consistently below 2% before reaching 4.2% in 2018. Beginning at 1.6% in the first half of 2018, tariffs on China’s good increased to 6.4% by the end of last year and by the second quarter of this year has reached 12% (Table E).
As shown in Figure 3, China has fallen from over 50% of total world imports in 2017 and 2018 to 46% in the first half of this year. Alongside China’s downturn in percentage of total imports, Mexico, Vietnam, and Canada have all increased their share of total world imports.
Import Sales by Product Type
Among the different types in the broad furniture import category, import sales of Household Furniture is highest at $48.4 billion in 2018, followed by Lamps and Lighting at $12 billion and Office Furniture at $2.6 billion (Table F). Import sales of Household Furniture slipped from the first half of 2018 to the first half of 2019 – dropping 5% and Lamps and Lighting decreased by 8.7%. Office Furniture import sales increased by 10% during the same time period. Household Furniture has consistently represented around 72% of the broad import category since 2002 (Table G). Lamps and Lighting have fallen in recent years— ending the first half of this year at 15.9%, while Office Furniture has gained a slightly larger share of 4.4%.