While stock markets soared in the immediate aftermath of the U.S.-China agreement to de-escalate their trade war for 90 days, the response from flooring dealers was more measured, with several saying greater clarity is needed to remove the uncertainty that still exists in the marketplace.
As of now, there remains a 30% tariff on most Chinese imports, with the current agreement in place until August. As well, there’s a 10% tax on imports from most other countries, as well as a 25% tax on imported steel, aluminum and cars.
Some flooring dealers cheered the news that the U.S. and China had agreed to a lessening of the triple-digit tariffs. “I am happy to see that it’s all going in that direction,” said Penny Carnino, COO of Tulsa, Okla.-based Grigsby’s Carpet Tile & Hardwood. “It’s so great to see the U.S. being treated fairly. I still believe more great agreements will continue and not only will we have much better trade agreements but manufacturing in the U.S. will thrive again.”
Grigsby’s is running a Made in America LVP sale, and the recent de-escalation should not impede the progress being made. “Hopefully Made in America will continue to be a great promotion as all of these agreements move forward,” Carnino said.
Fellow NFA dealer RC Willey used the run-up to the tariffs to create an urgency to buy now. It led to a booming April for the Salt Lake City-based dealer, which has 14 locations in four Western states. “Those consumers that were on the fence about whether to buy placed their orders to get it done while the prices were still low,” said Eric Mondragon, division manager/flooring buyer. “We were up 15% for the month of April. I’m seeing $30K, $40K and $50K orders being placed on the residential remodel side, as well as builders placing their orders for the next 20-30 units before the tariffs go into effect.”
Long-term concerns
News of the U.S.-China truce, however, failed to allay longer-term fears that price increases are coming. “Unfortunately, the back-and-forth trade talks between U.S. and China just seem to create more uncertainty and confusion for consumers,” Mondragon said. “The only thing they know is that imported products will cost more in the future.”
Several retailers have already absorbed price increases from their suppliers. A case in point is Abbey Carpet Unlimited, Napa, Calif. “Some of our suppliers have already announced increases, and they do not seem to be retreating on dates of implementation or number of increases,” said Janice Clifton, owner. “It is very different from supplier to supplier. I just received a notice from a carpet supplier that they are postponing their tariff increase for one week only. I think this may be an indicator that the retailers may not get as much relief as we thought with the reduced tariffs. I understand the difficulty of getting out new prices to dealers, but I hope more of them will delay the increases.”
Clifton said she was not planning to purchase inventory ahead of time since there are so many unknowns.
Carpet Exchange, with 15 locations in the Denver market, is also seeing price hikes. “We are currently observing domestic suppliers trying to pass on the increased costs associated with their imports,” said Bruce Odette, president, citing increments of 8%-10%. “This trend is particularly noticeable in the LVP category and wool broadloom products.”
Some flooring dealers say they are strategically partnering with vendors that manufacture domestically, with Frazier’s Carpet One Floor & Home of Knoxville, Tenn., also negotiating special stocking buys through the end of June to get ahead of tariff impacts. “Many of our current suppliers have offered products that are easier to obtain, do not have tariff increases and have been constant for them,” said Mitchell Parton, general manager.
Being proactive in the face of tariffs is a big part of the playbook employed at Home Carpet One in Chicago. The specialty retailer increased prices on everything in its showroom by 5% or until they get more “clarity,” according to Joel Schreier, owner. “For those vendors that have sent along increases, we are also passing those along,” he noted. “We are increasing everyone 5% and if the vendors send a 10% increase, we are increasing 10% total.”
Roughly half of Home Carpet One’s portfolio is stock products. “We quickly ordered our best sellers as soon as the tariffs were announced,” Schreier said. “For the few products that we sourced through China, we are in the process of finding alternatives. With respect to the tile we import from Europe, almost all vendors are splitting the cost of the tariffs for the time being.”
Of the U.S.-China temporary agreement, Schreier said, “It doesn’t change anything for me.”
For many, the great unknown is how the consumer will behave. Will they keep on spending like they have in the past or pull back? A few dealers have already experienced the latter.
“The average consumer is hesitant to make any unnecessary purchases due to the economic uncertainty we are currently facing,” said Paul Deschenes, general manager at Schneider’s Flooring America, Vernon, Conn. “My hope is that the tariffs are negotiated soon, so the roller coaster of uncertainty levels out.”
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