Classic Brands Responds to Tariffs

July 19, 2018  by Laurie Northington in Business Strategy, Industry   

The proposed tariffs include mattresses and other home furnishings categories, including upholstery, lighting and textiles.

According to CEO Michael Zippelli, a proposed 10 percent tariff on mattresses and home furnishings will have detrimental impact on consumers who benefit from product manufactured by low cost producers.

“This issue has the potential to negatively impact the entire industry, but overall, consumers will be the ones most harmed by this 10-percent tariff. A complete consumer group will be priced out of the market because it will no longer be able to afford basic items needed to furnish homes,” said Zippelli.

“In addition, mattress manufacturers and retailers will be faced with higher prices and an unstable supply chain and that will hurt sales across the home furnishings industry,” Zippelli added.

The new tariffs follow a previous wave earlier this summer that impacted steel and aluminum and could go into effect as early as this fall.

Zippelli said he believes the disruptions would be similar to 2005, when the ITC implemented anti-dumping duties on Chinese wood bedroom furniture after a petition was filed by several furniture manufacturers who had U.S. factories.

“That business never came back to the U.S., and there was upheaval throughout the supply chain while retailers scrambled to find factories in other countries who could make wood bedroom furniture,” Zippelli said. “It wasn’t a healthy situation then, and will only serve as a major irritant to retailers today if this tariff is implemented on mattresses and other imported products.”

“Ultimately, the companies in favor of the tariffs think they will save their business. They may see six months of disruption; that’s it. But watch out for the angry merchant whose supply chain was just disrupted. Once the tariff is in place, domestic players will use every means possible to raise pricing. Hang on, because prices on everything from foam to springs to finished mattresses are going to go up,” Zippelli added.

Classic Brands’ strategy for weathering any Chinese tariff is to rely on its redundant capacity in U.S. facilities in Maryland and California, as well as in other countries to ensure the supply chain for its retail partners isn’t disrupted.

“We’ll continue to be the low-cost producer in the marketplace backed by our suppliers, who refuse to be held hostage by politics,” Zippelli said.