Retail furniture retailers work hard to offer their customers a diverse selection of stylish and affordable home furnishings. Many of these products are sourced through international supply chains, ensuring a range of high-quality options at competitive price points. As policymakers weigh various trade policy proposals, it’s crucial for furniture retailers to understand how tariffs could impact product costs, consumer pricing, and the overall health of the industry.
What is a tariff?
Tariffs are a tax on goods imported into the United States, paid for by the U.S. importer. They are just one of several trade policy tools available for policymakers to achieve a successful diplomatic outcome. Tariffs are intended to raise the cost of imported goods, making them less competitive compared with domestically manufactured products.
When tariffs are enacted, retailers are forced to choose between raising their prices or relying on already slim profit margins to absorb the increased cost of inventory.
What announcements has the Trump administration made regarding international trade policy and tariffs?
At the start of his second term, President Trump signed three Executive Orders imposing a 25% tariff on imports of goods and a 10% tariff on energy resources from Canada, a 25% tariff on imports from Mexico, and a 10% tariff on imports from China.
While the 10% tariffs on China went into effect on Feb. 4, the proposed tariffs on Canada and Mexico were temporarily delayed until March 4 because the countries agreed to take action to stem the flow of illegal immigration and fentanyl into the U.S. The delay also provided time for additional negotiations among the parties to further address these issues.
On March 3, President Trump announced that the Canada and Mexico tariffs would take effect on March 4. He also announced an additional 10% increase in the China tariffs, also effective on March 4.
On Feb. 10, the president signed two new proclamations placing 25% tariffs on imports of steel and aluminum products, including downstream products. The proclamations reinstate the previous Section 232 tariffs implemented during the first Trump administration (25% steel, 10% aluminum) but increase the aluminum tariffs to 25%. The tariffs are set to take effect on March 12. They also remove the previous country exemptions and product exclusions that had been granted.
Additionally, on Feb. 13, the administration announced its “Fair and Reciprocal Plan” on trade that seeks to examine non-reciprocal trade relationships with U.S. trading partners and determine the equivalent reciprocal tariff to address trade imbalances. Initial reports are due April 1, which could lead to new investigations on a variety of trade issues. While this scale of undertaking is massive, it will likely result in higher prices for American consumers and will diminish spending power.
On Feb. 25, the president ordered a Section 232 investigation into how copper imports threaten America’s national security and economic stability. This investigation will assess the national security risks arising from the United States’ increasing dependence on imported copper and the potential need for trade remedies to safeguard domestic industry.
On March 1, President Trump ordered a Section 232 investigation to determine the effects on the national security of imports of timber, lumber and their derivative products (paper, furniture, etc.). The investigation will include recommendations on actions to mitigate such threats, including potential tariffs and policy recommendations for strengthening the United States’ timber and lumber supply chain.
How Do These Tariffs Impact the Furniture Retail Industry?
Furniture retailers rely on imported materials and finished goods from key trade partners to offer customers a diverse selection of stylish and affordable home furnishings. Since tariffs are taxes paid by U.S. importers, they directly increase the cost of furniture and raw materials, driving up prices for both retailers and consumers.
Small and medium-sized furniture retailers will be hit the hardest, as many lack the resources to absorb these additional costs. As a result, they will be forced to raise prices, making it more challenging to compete in an industry where affordability and value are key drivers of customer purchases. Higher costs may also lead to reduced inventory selection, longer lead times, and lower overall sales, ultimately impacting jobs and business growth in the furniture sector.
What are retailers doing to mitigate the additional costs caused by tariffs?
Retailers have been preparing for a variety of tariff scenarios for many months. Some have front-loaded cargo in advance of the tariffs, while others continue to seek alternative solutions to diversify their supply chains.
Retail supply chains are incredibly complex. Sourcing different products and their components is not an easy or quick process and can take years and significant investment to move operations. Additionally, some products simply don’t have the capability or workforce available to support domestic manufacturing. In addition, many small retailers are indirect importers and rely on other companies to import the products that they sell. These indirect importers have even less ability to shift their supply chains to mitigate tariff costs.
Retailers need predictable and reliable supply chains. Uncertainty and disruption to supply chains increase inflation and costs.
What do these tariffs mean for U.S. consumers and the economy?
A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax is ultimately passed on to consumers through higher prices. Canada, Mexico, and China are our top three trading partners—accounting for more than 40% of total trade and 5% of U.S. GDP—so the impact is profound and hard to escape if the tariffs remain in place for more than a few months.
According to the Tax Foundation, 25% tariffs on Canada and Mexico and 10% tariffs on China would shrink GDP by 0.4% and increase consumer taxes by $830 in 2025.
No matter the demographic, consumers are concerned about higher prices, rising inflation, and getting less while paying more. Tariffs are just one tool at the administration’s disposal to address trade disputes, and HFA, along with other retailer trade groups, urges it to explore other tools that can achieve the same goals. As long as these trade policy and tariffs are in place, American businesses, consumers, and the economy will bear the brunt through higher prices on everyday goods.
