President Trump imposed new tariffs on imported furniture, kitchen cabinets and lumber on Tuesday, adding a new round of levies as he again threatened to expand his trade war with China.
Shortly after midnight, tariffs of between 10 and 50 percent on foreign wood products and furniture went into effect. The tariffs are intended to promote domestic logging and furniture manufacturing. But critics say the levies could raise prices for American consumers and slow industries such as homebuilding that rely on materials from abroad.
The tariffs come on top of import tariffs that Mr. Trump has already imposed on cars, steel and other goods. And they come into effect as Mr. Trump engages in a high-risk gamble with China, one of America's largest trading partners, that could ultimately derail trade and slow the U.S. economy.
On Friday, the president said he could impose an additional 100 percent tax on all products from China starting November 1, after Beijing imposed restrictions on the export of rare earth metals. He also threatened to cancel a meeting with Chinese leader Xi Jinping in Korea that was scheduled to take place in a few weeks. American and European manufacturers of semiconductors, electric vehicles and other products rely heavily on Chinese minerals, and the new restrictions could be crippling for those industries.
Mr Trump's threat sparked a plunge in financial markets on Friday, with the S&P 500 index suffering its biggest daily decline in six months. On Sunday evening, Mr. Trump appeared to backtrack on his threat, telling reporters aboard the Air Force that “currently” the plan is to impose Chinese tariffs on November 1, “but let's see what happens. November 1 is forever.”
Stocks rallied on Monday as Mr. Trump hinted in a social media post that things might work out with China. “Don’t worry about China, everything will be fine!” wrote Mr. Trump on Truth Social.
“Eminent President Xi just had a bad moment. He doesn't want a depression for his country and neither do I. The US wants to help China, not hurt it!!!”
The president also faces a legal challenge before the Supreme Court, which could declare his tariffs against China and other countries illegal because of the authority Mr. Trump has used to enforce his sweeping tariffs.
But the tariffs that Mr. Trump imposed on Tuesday are not at risk in this case. The President's tariffs on furniture and lumber were enacted under another trade law, Section 232 of the Trade Expansion Act of 1962, which allows the President to impose tariffs to protect national security.
Some critics say imposing the furniture and lumber tariffs under the national security law is overkill. A Trump administration statement in late September said wood products were “used for critical War Department functions,” including building infrastructure for personnel and for transporting ammunition, and therefore deserved protection.
Scott Lincicome, vice president of general economics at the Cato Institute, a libertarian think tank, wrote in a blog post this week that the idea is “absurd.”
“If war were to break out tomorrow, there would be no concerns about U.S. 'dependence' on foreign lumber or furniture, and domestic sources could be quickly and easily obtained,” he said.
The tariffs that come into effect on Tuesday include:
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10 percent on imported lumber and lumber, much of which the United States imports from Canada.
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25 percent on imported upholstered furniture, including sofas and chairs, set to rise to 30 percent on January 1.
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25 percent on kitchen cabinets and bathroom vanities, expected to rise to 50 percent on January 1st.
Some American manufacturers lobbied for the tariffs, saying they needed protection from a flood of cheap foreign goods that threatened to put them out of business. But the tariffs will pose a challenge for many retailers that import products from around the world.
Farooq Kathwari, chief executive of furniture retailer Ethan Allen, said his company is better positioned than most because it makes nearly half of its products in the United States. Much of the rest is made in Mexico and Honduras.
“The tariffs have less of an impact on us, but they will definitely impact our industry,” he said.
Some production will likely move back to the United States because of the tariffs, Mr. Kathwari said, but that will take time. High labor costs were among the challenges that made it difficult for Ethan Allen, with factories in Vermont and North Carolina, to make furniture in the United States, he added. High medical costs in particular are making America “very uncompetitive,” he said.
“It’s not easy to get production going in the U.S.,” Mr. Kathwari continued. “We have all these hurdles.”
Arin Schultz, chief growth officer at Naturepedic, a maker of organic mattresses and furniture, said he was raising prices and considering switching suppliers to deal with the tariffs.
The company makes its mattresses at its factory in Chagrin Falls, Ohio, but imports furniture and materials, including textiles, from Sri Lanka, Vietnam and Pakistan. Naturepedic also planned to begin selling an organic upholstered headboard made in India later this year or early next year, which would be subject to Mr. Trump's tariffs on upholstered wood furniture.
Even before the recent tariffs on wood products were imposed, the company had planned to increase prices for its products by an average of 5 to 10 percent starting in November after depleting inventories of raw materials it had purchased before the tariffs took effect.
“We’re not trying to pass the cost entirely on to our consumers,” Schultz said. “We’ll still eat a good amount of it.”
Some economists expect higher prices for lumber and home furnishings to slow the pace of home construction in the United States. That could undermine the Trump administration's goals of improving the weak real estate market.
“It conflicts with the goals of making housing more affordable,” said Daryl Fairweather, chief economist at Redfin, a real estate brokerage firm. “In the end, fewer houses will simply be built.”
Anirban Basu, chief economist at Associated Builders and Contractors, a trade association, said the tariffs could benefit some domestic manufacturers, including custom upholstered furniture, domestic carpenters and carpenters. However, many of these industries are labor intensive, making it difficult to produce in a country like the United States where labor costs are high.
“This means that the prospects of relocating these forms of production to America are rather slim,” said Basu.