President Trump’s decision to impose 25% tariffs on goods from Mexico and Canada, as well as an additional 10% on Chinese goods, has unsettled financial markets and left many flooring industry members worried about the impact on business. In response to Trump’s March 4 move, China retaliated by announcing 15% tariffs on a host of goods, targeting some of the United States’ most important exports to China, including soybeans, meat and grains.
Meanwhile, Canadian Prime Minister Justin Trudeau said he would implement a 25% tariff on $20.7 billion of U.S. goods immediately, followed by an additional $86.2 billion in 21 days’ time. Mexico planned to announce new levies on March 9.
Financial markets tumbled in the immediate aftermath of the trade war tit-for-tat. From New York to London and Tokyo equities fell—with the S&P 500 nearly erasing its $3.4 trillion post-Presidential election rally.
In the wake of the Trump tariffs, FCNews spoke with U.S. flooring distributors, retailers and suppliers—as well as Canadian retailers and suppliers—for their take.
“Tariffs certainly will create disruption in the industry as the channel works to adjust,” said Scott Rozmus, president/CEO of Romeoville, Ill.-based FlorStar Sales, a top 20 distributor. “The industry will adjust as it did during President Trump’s first term, with suppliers moving production to more tariff-friendly locales. Certainly, there will be a lot of folks looking at onshoring and/or U.S.-exclusive supply chains as a means of providing relative cost certainty. The part that stinks is the channel must implement the changes, first of all. Then, imagine a firm lands a few truckloads or containers of stuff with a 25% tariff on it and then suddenly that goes back to the pre-tariff level. You’re now stuck with stuff way over market. Tough deal. This will impact a lot of decision making.”
Like Rozmus’ scenario, Elias Wilf president Jeff Striegel said that at any one time he could have 100 open orders, making price adjustments problematic in such an environment. “If tariffs go into effect, it’s hard to ask a customer to pay 25% more,” he said. “I’m going to end up eating it and making no profit on half a million dollars or losing money.”
Striegel called the tariffs “a disruption at a time when there is lot of disruption going on … retail continues to be soft, builder is hurting.”
Indeed, the tariffs are coming at a time of economic uncertainty, according to economists like Elliot Eisenberg, who said the latest tariffs are likely to result in a 0.75 percentage point increase in inflation. In a recent blog post, he wrote, “It’s still early, with partial data available only through January, but 25Q1 GDP estimates are tracking as low as -2.8%. Consumer spending shrank, the advance trade deficit skyrocketed to $153.3 billion, pending home sales are at their worst level in decades, consumer/business confidence has tumbled, the 10-year Treasury yield has fallen for seven straight weeks, a government closure 3/15 is possible, and expectations are suddenly for three Fed rate cuts.”
In advance of the tariffs, some companies took preemptive steps. Shaw Industries, for example, announced in a letter to customers a price increase of 7% on average, effective March 17 for orders, and March 30 for shipments on select products. The letter cited Trump’s executive order implementing tariffs on goods from China, Canada and Mexico.
Flooring companies are bracing for impact on price increases. A case in point is Tri-West Ltd., a Santa Fe Springs, Calif.-based distributor, which purchases wood flooring from Canada. “[If the tariffs take effect] we’re bound to see a price increase on those products—maybe not the full 25%, but I doubt the manufacturer can absorb the entire tariff,” said Dave White, president. “My bigger concern is how these additional tariffs will upset the overall economy as well as Wall Street. When the stock market drops, consumers get nervous and quite often put off large purchases. A higher cost of imports will put more pressure on consumers’ budgets, and they’ll have less discretionary income for floor covering purchases.”
Even for those who say tariffs can be an effective tool when properly applied as a temporary measure to manage trade issues, note the challenges these new increases could have. “There is definitely a case to be made for this type of product-specific tariff in today’s global economy,” said AJ Warne, vice president of sales and marketing for distributor Abraham Linc, Bridgeport, W.Va. “[However,] I do not believe levying tariffs on our two largest trading partners—Canada and Mexico—are the most useful tools to achieve our political goals, and victims of this policy will be consumers who will pay more for everything. As for the flooring industry, we will see winners and losers because of this policy, but ultimately it will result in higher retail prices for consumers on products whether they are made in a targeted country or not.”
Canadian reaction
Not surprisingly, many Canadian flooring dealers view the tariffs as potentially damaging to their business. “When governments get involved in business by telling private enterprise what they can buy or sell and from or to whom, it introduces market inefficiency,” said Andrew Wiebe, president of Carpet Colour Centre Carpet One Floor & Home, Red Deer, Alberta, Canada. “That inefficiency will always lead to slower growth. Tariffs, and even the uncertainty around the threat of tariffs, are a significant drag on the economy. Let’s not try to hide behind terminology: a tariff is simply a tax. I believe the proposed tariffs will represent the largest single tax increase in generations. Goodbye growth, hello inflation. Economists call it ‘stagflation.’”
Even before the tariffs took effect, Canadians were binding together in a show of national pride that impressed dealers like Raffi Sarmazian, Sarmazian Brothers Flooring, Waterloo, Ontario, Canada. “There is a growing movement of ‘Buy Canadian,’” Sarmazian said. “We literally have customers coming in and asking only for Canadian-made products. The problem is our economies are so closely interconnected, and these tariff threats will hurt our economy and create job losses. Consumer confidence has also been negatively affected. My hope is that we can negotiate a deal that is beneficial for both countries and we can move past this.”
Rebecca Tonowski, manager of BFC Flooring & Design Centre, Edmonton, Alberta, Canada, said having to pay an additional 25% tariff on already expensive product coming from the U.S. “will be a hard sell in our market, and to stay competitive showcasing American suppliers. The Canadian dealers will need to utilize brands that we can access locally, considering many of those products will have the 10% increase due to the tariff charged on China imports—but are purchased through American companies, yet come direct to Canada. Our purchases will inevitably change with some of the large U.S. manufacturers and overall will increase the costs of the construction industry as a whole.”
Speaking for Canadian hardwood supplier Mercier, Wade Bondrowski, director of sales USA, said the company does not see the purpose of Canadian pre-finished hardwood being subject to tariffs. “We are not a low-cost, dumping type of manufacturer, and we pride ourselves on making the best possible products at a price that goes along with making that category of product,” he told FCNews. “We could see how tariffs could come into play if we were a low-cost producer driving down a market or being subsidized by a particular government, but with Mercier and the majority of our Canadian producers this is not the case. We find a one-shoe-fits-all type of tariff is objectively unfair. We always thought of ourselves as a great trading partner to the U.S.”
U.S. players respond
Flooring dealers in the U.S. were a bit more tolerant of the Trump tariffs than their Canadian counterparts. “Tariffs always make business a bit more difficult because of the volatility in pricing,” said Eric Langan, president of Carpetland USA (The Langan Group), with nine locations across Iowa and Illinois. “It’s hard to stay in front of it and it obviously increases the costs of goods coming from these countries. With the consumer already having experienced a significant increase in goods and services over the past three to four years due to inflation, additional price increases on these products will only stress the consumer more. It’s definitely not a positive for the end-user or the industry in the short term, but if it’s necessary to have these countries become better trade partners in the long run, so be it.”
Bob Pireu, co-owner of Bob & Pete’s Floors, Canton, Ohio, said his stance on the tariffs has been directed by the distributors and manufacturers he deals with. “They are all moving to products made in the USA, and I think that’s a great thing,” Pireu said. “They also feel [the tariff] will be short-lived, have increased their inventory and planned well for it. So, I am not sure it will impact us much. The smaller distributor or the mills that did not plan ahead will be hurt. I think anything that helps our country’s long-term strength—even with short-term consequences—I am in favor of and will support.”
Taking a more pragmatic approach was Adam Joss, owner of The Vertical Connection Carpet One Floor & Home, Columbia, Md. “I try to focus my attention on how we can operate with a variety of changes in the world,” he said. “I try not to get too caught up in opining on hypotheticals. We pay attention, talk to our supplier partners and try to plan and prepare as best we can. That’s all we can do, really.”
Industry veteran Don Finkell, president of SPC importer East Paragon, which sources from Asia, said the new tariffs are especially burdensome for China. “If tariffs on Chinese-made flooring go up an additional 10% I don’t see how China remains competitive,” Finkell said. “That’s a total of 45% additional [tariffs] on the price of Chinese-made flooring. The flooring industry is going to move to other countries and potentially back to the U.S., which is the President’s goal and promise to his constituents. There has been a scramble by Chinese companies to move to more tariff-friendly places, including North Georgia. At East Paragon we will bring our customers the best in design, performance and value no matter where that takes us.”
