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Trump’s tariffs force manufacturers to take action

By FCNews staff

After months of speculation as to how the Trump Administration’s newly imposed tariffs on select Chinese goods might impact floor covering manufacturers—and ultimately their distributor partners, retailers and consumers—the verdict is in. FCNews has learned several major suppliers who import products and/or flooring materials from China are planning to raise prices as a direct result of those tariffs.

On Sept. 18, the Office of the United States Trade Representative (USTR) released a list of approximately $200 billion worth of Chinese imports—including flooring—that will be subject to additional tariffs. In accordance with the direction of President Trump, the additional tariffs are effective starting Sept. 24, and initially will be in the amount of 10%. Beginning Jan.1, 2019, the level of the additional tariffs will increase to 25%.

On Sept. 20, Armstrong Flooring announced it will increase prices to offset the imposed 10% tariff on affected products it imports from China. This includes luxury vinyl tile, rigid core flooring and engineered wood flooring. The initial price hike is slated to go into effect Oct. 1, 2018. In addition, Armstrong expects to implement another price increase effective Jan. 1, 2019, to offset the 25% increase in the tariff.

“Our team stands ready to work with customers to provide the best flooring solutions, from our own U.S. plants and global suppliers,” said Don Maier, president and CEO, Armstrong Flooring. “Although increased prices due to the tariff are unavoidable, we will look for opportunities to mitigate the impact where possible.”

Armstrong Flooring is primarily a domestic manufacturer, with 75% of its sales last year generated by products it makes. According to Maier, the company has made substantial investments to expand its capacity to manufacture flooring products in the U.S., including developing LVT production lines at plants in Pennsylvania, Illinois and Oklahoma. The company also increased its engineered wood capabilities at plants in Kentucky and Pennsylvania.

“At the same time, we recognize and value the importance of fair trade worldwide,” Maier noted. “Sourcing products from other countries expands our access to new innovations and provides additional capacity that is not available in the U.S. today to meet rapidly increasing market demand for specific products.”

Armstrong is not alone. Shaw Industries also disclosed plans to raise prices, accordingly, as a result of the tariffs on imports from China. Categories affected include: ceramic tile, laminate, engineered wood flooring and vinyl flooring products—including LVT—imported from China.

“We have shared with our customers a 10% increase on products manufactured in China,” said Tim Baucom, executive vice president - residential business. “This increase is inclusive of the tariff, as well as increases in raw materials, transportation and labor costs. We have also communicated to our customers that per the publication from the USTR, starting Jan. 1, 2019, the tariffs will increase from 10% to 25%. This action would require us to adjust our pricing.”

When rumors of a tariff imposition began brewing back in July, Shaw Industries and other suppliers and industry associations had formed a coalition to block its implementation. At the time, Shaw felt the tariffs would result in higher prices—and fewer choices—for the consumer. As Baucom recalled, “Shaw Industries appreciated the opportunity to testify before the Office of the U.S. Trade Representative against the proposed tariff on certain flooring products imported from China. Given the announcement that tariffs will be assessed, Shaw Industries customers purchasing hard surface flooring products manufactured in China will be impacted by this increase. Our goal has been to be transparent with our customers during this process.”

Baucom reiterated Shaw’s commitment to our customers to “deliver the right products at the right time. We do so—just as other global companies in our industry and beyond do—with a combination of domestically manufactured and internationally sourced products. Shaw has invested more than $1.5 billion in our existing and new U.S. facilities over the past five years to deliver upon this commitment, including a $130 million investment to create domestic LVT manufacturing at Plant RP in Ringgold, Ga. We are continuing investments at Plant RP to build additional product and innovation capability.”

USFloors, a division of Shaw and marketer of the COREtec brand, also plans to raise prices 10% with all orders starting Sept. 24 and with shipments starting Oct. 1. Piet Dossche, founder and president of USFloors and executive vice president of Shaw Hard Surfaces, told FCNews that all companies who currently sell WPC or SPC products into the U.S. market are impacted by the 10% tariffs. “Unlike certain flexible LVT products, which can be sourced from countries other than China, all rigid LVT (WPC/SPC) products are only made in China and cannot be sourced elsewhere. Shaw Industries raised this argument in front of the USTR commission in Washington and argued that rigid core LVT should be excluded from tariffs since there are no alternatives available [other than China]. But unfortunately, this fell on deaf ears.”

Dossche said USFloors and Shaw have no choice but to pass on this tariff through a price hike. “We want to make clear, we support our administration and president in their efforts to renegotiate trade agreements with China and other trading partners, but we do not believe tariffs are the right tool to achieve this objective. Our industry and retail partners are enjoying a strong year of growth and profitability after the doom years of the Great Recession thanks to the exponential growth of rigid LVT, all initiated by the introduction of COREtec into the market in 2013. Shaw and USFloors are committed to support our retail partners to drive further growth and profitability for our retail community and industry at large.”

Other suppliers are following suit. Mannington said it has been impacted by tariffs on vinyl products that it is importing from China, specifically certain LVT products. “We have already announced a price increase to cover the tariff increase that will go into effect Oct. 1,” said Ed Duncan, president of Mannington’s residential business. (On Sept. 10, Mannington announced plans to implement a 4% to 7% price increase on select hard surface products that applies to shipments in both the U.S. and Canada. Duncan noted this increase is being implemented pre-tariff, and that any tariffs imposed in the future would drive an additional increase upon the effective date of the tariff.)

Michael Raskin, founder and CEO of Raskin Industries, which imports some of its products from China, had this to say on the matter: “At Raskin we strive to offer the best price-value proposition. This is evident by the fact that we have never had a product line price increase. We feel we offer true manufacturing/distribution partnerships, offering full marketing support without inflating prices. We are introducing new prices on all of our products manufactured in China. The new pricing will reflect an increase on goods that enter U.S. ports on or after Sept. 24. Because we have diversified manufacturing, we offer a range of products manufactured in the U.S. and Korea that, of course, won't be affected by the tariff.”

Bamboo Hardwoods, whose products are sourced from China, also plans to raise prices—but with a caveat: “Along with our manufacturers, we will be absorbing some of the added increase of the tariff,” said David Keegan, president and CEO. “We hope our distributors and retailers absorb a little bit as well, so pricing to the end user can remain the same. When it goes to 25%, prices will be going up.”

FCNews also reached out to Mohawk and Novalis for comment—both of which declined.

News of the tariffs are expected to cause ripples throughout the supply chain. Phil Koufidakis, president of Phoenix-based Baker Bros., said: “I definitely have some concerns surrounding the continued pricing increases and the potential tariffs that may affect the value proposition and availability of our products.”

In that same respect, Kevin Rose, owner of Carpetland USA in Dixon, Ill., said the tariffs have the potential to slow sales. “It feels like we are getting weekly letters from manufacturers announcing price increases,” he told FCNews.

Surprising, the majority of members of the World Floor Covering Association (WFCA) favor the new tariffs on vinyl products imported from China. That’s according to a recent WFCA survey taken to determine the impact on its members. While many manufacturers oppose the tariffs and have gone to Washington to lobby against them, most WFCA members do not oppose the tariffs.