ana-air canadia-bank Silk-air nissan acleda cab-bank

In US furniture industry no illusions about tariffs and jobs

Reuters / No Comments Share:
The assembly line at Bernhardt Furniture Company where the focus has shifted to upholstered and other goods that allow greater customisation. Reuters

THOMASVILLE (Reuters) – In a town where a 30-feet tall chair is the chief landmark, and which is synonymous with a US furniture industry decimated over the years by imports from China, many greet the possibility of tariffs on Chinese goods with a shrug.

No wonder. Of three once bustling Thomasville furniture plants in the city limits, one is being demolished and cleared for parkland, another may become the site of a new police station, and a third is being converted into apartments.

President Donald Trump is threatening to levy tariffs of up to 25 percent on $500 billion of goods imported from China each year, including roughly $20 billion of furniture, as a way to bring back hundreds of thousands of manufacturing jobs lost to China and other low-cost competitors.

Yet, the transformation of US industries since China’s emergence as the world’s low-cost producer almost two decades ago means many no longer directly compete with Chinese imports, so tariffs may not translate so easily into more US jobs.

At family-owned Bernhardt Furniture in Lenoir, some 90 miles west of Thomasville, executives say it would take about $30 million in capital investment – some 10 percent of annual sales – to resurrect standard wood furniture lines now mainly made in countries like China and Vietnam.

That is too much to commit based on a policy that a future administration could reverse.

“The theory is you turn (imports) off, the jobs come back. That’s not really true… The buildings don’t exist. The people don’t exist. The machinery does not exist,” to make the sorts of furniture that now gets imported, said Alex Bernhardt Jr., chief executive and the company founder’s great grandson.

What the company needs now, executives say, is the open markets and steady economy that have allowed it to grow its workforce from below 800 at the end of the 2007-2009 recession to almost 1,500 today – partly on the basis of exports to China.

That growth has been largely driven by demand for more customized, higher end furniture. In expanding, the 129-year-old company has been hiring not only factory workers, but also designers, marketing experts and other professionals.

Economists say the same is true across much of US manufacturing. To invest and hire more workers, executives would need certainty, for example, that consumers would prefer US-made products at a potentially higher price.

Even then, there may be little incentive to go back to old product lines for industries that have changed dramatically because of globalisation.

Across the Rust Belt and the former factory towns of the south, the transformation is apparent. In Buffalo, an old steel mill is now a solar panel factory, and a retail goods manufacturer now houses an office and restaurant park.

JLab Audio’s China-made Bluetooth products are not being taxed yet, but its chief executive Win Cramer had been scouting for suppliers in Vietnam and Mexico.

“I would love to build products onshore, but consumers have proven time and time again that “Made in America” isn’t as valuable a statement as it once was,” Mr Cramer said. “They make decisions based on the cost.”

The price of, say, its Bluetooth earbud would jump from $20 to as much as $50 if it was made in the United States, Mr Cramer said, far more than what tariffs would add to the cost of imports.

Producers such as US Steel and Century Aluminum have said they will add at least several hundred jobs as a result of the higher prices they can charge. Mid-Continental Nail, however, laid off 130 workers because of those higher steel prices, and furniture parts maker Leggett & Platt has warned that rising metal prices would prompt it to shift production abroad.

So far, Washington has imposed duties on $250 billion of Chinese imports and Mr Trump has threatened to slap tariffs on all Chinese goods.

The furniture industry, among the hardest hit by Chinese imports, has added 43,000 jobs since its employment hit a low of 350,000 in 2011, helped by the recovering housing market and strong consumer demand.

Industry officials say skilled upholsterers and other workers are hard to find, echoing the Federal Reserve’s concern about the impact of worker shortages on the US economy.

In Thomasville, few expect that tariffs will bring furniture manufacturing back to its heyday, says city manager Kelly Craver, whose parents worked in the furniture and textile industries.

Thomasville has its own mix of manufacturing and white collar jobs. Mohawk Industries recently expanded its Thomasville laminate flooring facility while the Old Dominion Freight Line transportation firm and the fast-growing Cook Out burger chain have corporate headquarters there.

Related Posts

Previous Article

China to boost digital economy

Next Article

Hong Kong property firms scramble to lure buyers