Remember when tariffs were the furniture industry’s biggest problem? | Bill McLoughlin

The USTR’s announcement last week that Section 301 tariffs on China would continue, pending further review, came as little surprise and caused little stir in the furniture industry. Now four years since their imposition, the impact of the tariffs has been weighed, measured and baked into the everyday process of sourcing and selling goods.

Whatever manufacturing there was to be moved has been moved, the spate of new factories and warehouses that needed to be built to accommodate the shift of production is essentially complete, although the infrastructure to support that shift in Vietnam and other affected countries will take years still. Despite that the process of reorienting, whatever business could be moved has taken place and in some cases even rebounded and returned to its original state.

After a year that saw freight rates increase 400%, 500% and more, a 25% penalty on imports from China now appears mild by comparison. COVID-19, a massive spike in consumer demand, an unprecedented supply chain crisis, once-in-a-generation inflation followed by plummeting demand have all served to push tariffs to the bottom of the daily headache list.

Tariffs rarely find their way into conversation about the state of the business and its challenges these days. Who would have thought that four short years ago?

This isn’t to downplay the impact the tariffs have had on those reliant on goods out of China, nor is it to suggest they are irrelevant, far from it. But looking at them in the context of today’s challenges puts them in a different perspective.

The initial impact they had on pricing was negligible compared with those that resulted from the massive spike in container rates. The scramble to realign sourcing in the wake of their initial imposition seems mild compared with what’s happened since in the wake of the supply chain crisis.

Taken in concert, however, the tariffs and supply chain crisis that followed have had and will continue to have a profound impact on the global sourcing environment. When historians look at this period in the history of the furniture industry, the imposition of tariffs may well be viewed as the event that presaged a fundamental realignment of global sourcing.

Near-shoring and re-shoring efforts continue to accelerate. Even for those that produce within the U.S. there is a quiet movement underway to decentralize production and bring it closer to the markets it will serve. This represents a fundamental shift in philosophy from one driven by the economies of scale and efficiencies of consolidated manufacture to one underpinned by the needs of speed-to-market, threat minimization and flexibility.

The history of tariffs and their impact has yet to be written, particularly as it seems increasingly likely they will remain in place for the foreseeable future. And while they are less concerning today than they once were, their impact has been and will continue to be significant and worth watching.

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