Statistically Speaking: Pandemic Slows Flow of International Goods

September 29, 2020  by HFBusiness Staff in Business Strategy, Industry   

U.S. furniture imports peaked at $31.8 billion wholesale in 2018 before dropping 6.1% to $29.9 billion in 2019. (Table A and B). Furniture imports have continued to fall from 2019 Q2 to 2020 Q2 – decreasing 13.6% from $14.9 billion to $12.9 billion and an additional 12.4% from the first quarter of 2020 to the second quarter.

Furniture exports have wavered over the past 6 years and were on the rise before declining 3.9% 2018 to 2019 from $3.6 billion $3.5 billion. Over the past year (2019Q2 to 2020Q2), U.S. furniture exports have plummeted 21.4%. And during the pandemic between Q1 and Q2 they fell 17.2%.

It wasn’t until the end of 2018 when the U.S. and China entered into the famous “Tariff Wars” that duties on imported furniture, bedding and other home furnishings goods to the U.S. totaled more than 1.1% of the import value. Since that time, duties have risen to 8.4% of the total import value with 90% of the revenue coming from China (Table C).

Imports
Traditional household and institutional furniture imports totaled $29.9 billion wholesale in 2019, down from $31.5 billion in 2018. Most imports of furniture products peaked in 2018 before the decline began in 2019, including upholstery, nonupholstered wood furniture, metal furniture, and mattresses (Table D).

As shown in Figure 1 and Table E, most furniture categories increased during 2017 and 2018 and once the tariffs hit, those numbers began to decline. With the introduction of bed in a box, Mattresses imports jumped dramatically in 2017, and this year 2019 Q2 to 2020 Q2 – increased 39% alongside decreases for all other categories. Once the pandemic arrived at the end of March, imports continued a downward trend from the first quarter this year to the second quarter with the exception of imports coded to all other “Household Furniture (except Wood and Metal)”.

The U.S. imported goods from 132 countries in the first half of 2020, totaling $12.9 billion dollars wholesale. This number is 13.6% less than 2019 Q2 YTD. In 2014 China exported over 5X the goods to the U.S. as Vietnam. That ratio has slowly closed over the last seven years to 1.9X the amount this year (2020 Q2 YTD). Shown in Figure 2 Chinese furniture imports dropped from $18.4 billion in 2018 to $14.2 billion in 2019. And this year from 2019 Q2 to 2020 Q2, the number decreased from $7.7 billion to $5.5 billion. On the flip side, imports from Vietnam increased from $4.3 billion in 2018 to $5.9 billion in 2019.

Vietnam was also the only country in the top 5% of U.S. importers to have positive growth between 2019 Q2 and 2020 Q2 – increasing from $2.6 billion to $3.0 billion. Although Chinese imports are down this year 2019 Q2 to 2020 Q2 YTD by 28.2%, as the pandemic took hold in the U.S., China’s growth jumped 11.2% between the first and second quarters (Figure 3). Meanwhile, imports from Vietnam, which had jumped 35.5% in 2019 and another 16.5% from 2019 Q2 to 2020 Q2, decreased 23.2% from 2020 Q1 to 2020 Q2. Furniture imports from Mexico have also increased steadily through 2019 before falling in 2020.

As a percent of total imports, China still leads the way at 47.6% in 2019 but that percentage has declined from 58% in 2014. In 2020 Q2 YTD, China accounted for 43% of total imports compared to Vietnam at 23.1%. Vietnam has also increased from 11.2% of total U.S. furniture imports in 2014 to 19.6% in 2019, while Mexico and Canada have both hovered around 5% (Figure 4).

Exports
As shown in Figure 5, Canada is the only major country importing significant amounts of U.S. furniture goods, with consistent annual imports around $1.7 billion. Over the past year (2019 Q2 to 2020 Q2), all the countries contributing over 1% to U.S. exports decreased, including Canada – down from $885 million to $736 million.

Canadian exports increased by 0.5% from 2018 to 2019, but then decreased by 16.8% from 2019 Q2 to 2020 Q2 and 10.7% from the first quarter of 2020 to the second quarter (Figure 6). This year Canada still represents over half of the U.S. export dollars (53.3%) – up from 50.6% in 2019. Mexico is the next highest contributor at 8% this year, followed by United Kingdom at 2% (Figure 7).

The U.S. has not had a positive foreign trade balance since the 1970s. In furniture, 2019 was the first year to show some improvement in foreign trade balance since 2009. The deficit fell from (-$28.2) billion to (-$26.4) billion in 2019 and has improved again this year (2020 Q2 YTD) despite falling exports. (Table F).

Of the 195 countries in which the U.S. conducted foreign trade, either exports or imports, the U.S. had a positive trade balance in 127 countries and a negative trade balance in 68. However, the major trading partners, China, Vietnam, and Mexico are still significantly upside down, with U.S. imports considerably larger than exports (Figure 8). The COVID-19 pandemic has definitely been disruptive to foreign trade, but if the virus can stabilize further worldwide in the months to come, the flow of international goods should improve slowly over time. Until then, supply chains to furniture stores and online retailers will continue to experience disruptions and the consumer will become more frustrated with wait times and smaller selections.