When President Donald Trump meets with his Chinese counterpart, Xi Jinping, at the Group of 20 summit in Argentina on Nov. 20, they’re expected to talk about tariffs, a subject of growing interest to furniture retailers.
Many U.S. businesses hope they’ll agree to de-escalate a budding trade war.
“We are planning for the worst and hoping we’ll be pleasantly surprised if things go well,” Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, said in a phone interview Tuesday.
In September, the U.S. imposed tariffs of 10 percent on approximately $200 billion of imports from China. The border tax is slated to jump to 25 percent on Jan. 1. The list of products covered includes furniture and many furniture components.
The office of U.S. Trade Representative says the action responds to China’s illegal trade practices:
“China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
- “China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
- “China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
- “China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.”
Gold noted that the Trump administration believes tariffs provide the leverage to force China to the bargaining table but added that “China doesn’t want to make a deal with a gun to their heads.”
The Home Furnishings Association supports holding trade partners accountable for unfair actions but doesn’t agree that tariffs present an effective solution.
Yet the tariffs do give the U.S. leverage in negotiations with China, said Chris Andresen, senior vice president of Dutko Government Relations and a lobbyist for the Home Furnishings Association. The question is what concessions can President Trump force from the Chinese? The stakes are high.
“Given the lack of substantive trade discussions between the U.S. and China in recent months, the scheduled meeting between President Trump and Premier Xi at the G20 is positive,” Andresen wrote in an email Wednesday. “However, we don’t expect a swift resolution as there are complicated issues before the two leaders. Each is trying to deliver tangible victories to his constituencies back home.
“The 25 percent tariff rate escalation for List 3, which contains more consumer-facing products, including furniture and its components, is a significant event, and most furniture retailers agree that will ultimately lead to price increases. We have seen several public company forecasts into early 2019 with the tariff issue being the key driver for possible disruption in economic growth.”
The National Retail Federation has pushed against tariffs and called for a clear process to gain exclusions of product categories. It continues to seek support from members of Congress, Gold said, adding that it’s “unclear what action if any Congress will take.”
In the meantime, reports indicate that many U.S. businesses have accelerated imports of Chinese-made products in advance of the higher tariffs taking effect, adding to their inventory to provide a temporary cushion against rising costs. If the tariffs stick, furniture retailers eventually may have to hike prices on imports from China.