Tariff survey: Diving deep into your responses
December 18, 2018 | 12:29 pm CST
Photo By Superior Cabinets
How is the woodworking industry reacting to the fallout from recent trade disputes and tariffs?
We at Woodworking Network conducted a survey last month, which asked our audience of professional cabinetmakers, furniture manufacturers, and makers of millwork, retails displays, and other wood products, how tariffs are affecting their businesses. All of our respondents use imported materials or components to make their products.
85 percent said they will increase prices to customers. Watch a webinar hosted by Will Sampson explaining the results.
Specific responses ranged greatly. Some expect great losses of revenue, some are okay with rising costs of material, some expect no difference in their business, and some are more nuanced:
- The current 10% tariff added to our previous 3.3% has resulted in an 11% drop in sales during our usual best months. If the threatened 25% comes into play we will virtually have to consider shutting down and laying off all our employees.
- Not much, our imports are a very small portion of things we buy. We are hoping the tariffs are extended to impact products that unfairly compete against us.
- Your clients will only pay so much for product. Domestic sources are still too expensive. There is a slow down of opportunities.
- The most acute effect of tariffs has been those tariffs China placed on U.S.-grown lumber. This has driven raw lumber prices down and significantly reduced our raw material costs.
- Started last year with imported Chinese oak plywood. Hate to say it, but domestic mills were and are producing inferior panels AND at higher prices. It wouldn't be as bad if the quality was the same - I'd even happily pay a reasonable extra price. Even what we pay now. But we 're paying more for crappier materials from domestic mills who don't have to care. Hate to say it, but everyone knows this is true.
- My guess is that at least as far as sheet stock is concerned, the Canadian mills of plywood and particle board will be the only sources for some sheet stock because why would a U.S.-based firm build a plywood plant only to have the next president remove the tariffs.
- No real effect. We enthusiastically support the president.
- Business is booming, tariffs will not have a big effect.
- Material costs will go up, but buying American will help other American companies and I'm for building our country first.
- If the tariffs go to 25%, we will likely lose in excess of $15 million in annual revenue. About 65% of our business.
We asked: "Why not buy from domestic sources?"
- I use both sources to make sure that I don't get locked into only one supplier.
- There is no sign that domestic plywood manufacturers are interested in selling commodity plywood that can be used to laminate countertops. That's what we primarily use imported plywood for.
- I would prefer domestic products. The domestic companies aren't making products of the same finish quality as the imports
- American quality does not appear to be so good and prices are too high
- Tariff or false claims of "dumping " are not made to equalize the playing field, but are a vehicle to allow domestic suppliers to increase their price and margin of profit. It's a game, with manufacturers, and the American consumers as the losers.
We've also heard from several companies outside of the survey. Cabinet Joint, Sunco Cabinets, CNC Cabinetry, JSI, and others have sent letters to their customers indicating prices would increase or that they could. Trendway Corp., a Michigan employee-owned office furniture manufacturer, has announced its commitment to no price increases in the next 12 months.
At a recent Wood Products Manufacturers Association (WPMA) meeting in Nashville, wood product executives named tariffs as one of the main challenges they are facing, along with trucking problems and a labor shortage.
The Reshoring Initiative (RI), whose mission is to teach manufacturers that local production can reduce costs of ownership, is telling multinational companies hit by the tariffs to do the math correctly.
Most companies make sourcing decisions based solely on price, oftentimes resulting in a 20 to 30 percent miscalculation of actual offshoring costs. The firm offers a free online tool, the Total Cost of Ownership (TCO) Estimator, designed to help companies account for all relevant factors — overhead, balance sheet, risks, corporate strategy, and other external and internal business considerations — to determine the true total cost of ownership. TCO allows companies to better evaluate sourcing, identify alternatives and even make a case when selling against offshore competitors.
As of early December, the trade war is on pause. According to the New York Times, President Trump and Chinese President Xi Jinping reached an agreement that will result in a 90-day halt on tariff implementation plans. In the handshake deal, Trump promised the U.S. would hold off on the 25 percent tariffs scheduled for January 1 and China "agreed to an unspecified increase in their purchases of American industrial, energy and agricultural products."
Both countries must reach a more concrete trade agreement in 90 days. If an agreement cannot be reached, the 25 percent tariffs are back on.
We will see what happens. Let us know your thoughts in the comments.
Have something to say? Share your thoughts with us in the comments below.