Kitchen & Bath Design News

NOV 2018

Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.

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"upend" the appliance market, according to The Freedonia Group, a Cleveland, OH-based business research firm. "Should these tariffs result in price increas- es for kitchen appliances, sales could slump," Freedonia said. Freedonia analysts pointed out that not all appliance manufacturers are likely to be affect- ed by the tariffs in the same way. The impact on a company will depend on several factors, Freedonia said, including where manufacturing operations are located, whether supply chains cross U.S. borders and from which countries companies source raw materials. Several na- tions have also been granted exemptions from the steel and aluminum tariffs. The tariffs, nevertheless, will "have a direct impact" on home appliance manufacturers, in- creasing operating costs while proving likely, in many cases, to increase prices for consumers," according to AHAM. "As an industry, AHAM's members have been successful global traders for decades, and support free and fair trade that allows for un- fettered competition that drives innovation and operational efficiencies in the marketplace," said Jennifer Cleary, AHAM's v.p./Regulatory Affairs. "[But] this latest round of tariffs pulls con- sumers' homes into the middle of an interna- tional trade dispute," Cleary said. "These tariffs, in addition to the tariffs on imported steel and aluminum, are taxes – and higher prices for consumers are the likely result of increased costs to import appliances and the parts and materials needed to make and service them. "American manufacturing jobs could also be lost," she added. PRICING STRATEGIES VARY As the reality surrounding the tariffs sifts into the marketplace, companies on all levels of the product supply chain are being forced to ponder a range of tactical responses to the duties, even as they confront uncertainties over the short- and long-term economic impact of the levies. Some manufacturers, importers and other suppliers have announced they have no choice but to pass the added cost of the tariffs along to retail customers, and ultimately to consumers. Others say they're holding the line on prices for now, even though their profit margins may temporarily be pinched. Still others are simply waiting to see how the current trade war shakes out. The Bronx, NY-based Summit Appliance Division of Felix Storch, for example, an- nounced it has delayed passing cost increases for many of its appliance lines on to customers, but the tariff on some icemakers "is beyond what we can absorb," and new purchase orders must reflect an added cost. In a slightly different approach, MaxLite, a Caldwell, NJ-based supplier of lighting prod- ucts, said it will hold prices through Dec. 31, while continuing to mitigate the effects of tariffs on prices of Chinese imports and closely monitoring the situation. IMPACT ON HOUSING & REMODELING Aside from whatever impact the tariffs may have on specific companies, the duties could wind up resulting in a massive "tax increase" on residential construction and remodeling, "at a time when builders are already grappling with rising construction costs," according to the National Association of Home Builders. "The decision to impose 10% tariffs on $200 billion worth of Chinese imports – including $10 billion of products used by the home-build- ing industry – could have major ramifications for housing," said NAHB Chairman Randy Noel, who urged U.S. trade officials "to change course and work to resolve trade disputes in a manner that won't harm American businesses and consumers." To exacerbate matters, the Chinese tariffs were imposed on the heels of previous levies on Canadian softwood lumber – tariffs which, by themselves, are making housing less afford- able, the NAHB said. Rising lumber prices have increased the price of an average single-family home by near- ly $9,000 since January 2017, effectively pricing out more than a million U.S. households from the housing market, according to the NAHB, which reported that housing affordability in the U.S. declined to a 10-year low in the second quarter of 2018. "With America facing a housing afford- ability crisis, it's counterproductive to enact policies that will needlessly drive up the cost of housing," Noel argued. "If this continues, the slow-but-steady recovery of the housing market could be derailed [and] homeowners looking at high-ticket purchases may hold off on pursuing lumber-intensive home renovations, which has the potential to negatively impact contractors and manufacturers of products like cabinets." "Rising material costs…do not help builders to be excited about business," commented Lawrence Yun, chief economist for the National Association of Realtors. The lumber tariff, Yun said, "is a pure, unforced policy error that raises costs and limits job creation and more home building." Similar warnings are being sounded by the American Institute of Architects (AIA), which recently opined that steel and aluminum tariffs will inevitably translate into higher costs for home builders and residential architects by "drastically increasing" the price of many building materials, including structural metal beams, window frames, mechanical systems and exterior cladding. Tariffs on steel and aluminum imports "will have far-reaching implications on building materials, construction costs and economic growth," AIA President Carl Elefante said, adding that, "the potential for a trade war risks other building materials and products. "Any move that increases building costs will jeopardize domestic design and the construc- tion industry," Elefante said. Similarly aligned against the tariffs is the Plumbing Manufacturers International (PMI), which said that imposing tariffs "unnecessarily penalize plumbing fixture and fittings manu- facturers, their employees and the American consumer." "Ultimately, the American consumer will pay the price of new tariffs, which will hurt job creation in the residential construction, retailing and home-improvement industry," said Kerry Stackpole, CEO/executive director of the PMI, which represents manufacturers of toilets, urinals, faucets, showerheads and other plumbing products. "The duties on plumbing fixtures, fittings and related plumbing components will result in higher costs for consumers, significant supply chain disruptions and a negative impact on growth and jobs," Stackpole warned. According to the Association of Home Appliance Manufacturers, newly enacted tariffs impact dozens of components used to man- ufacture major home appliances, including refrigerator-freezers, ovens, ventilation hoods, microwave oven parts and wine chillers. Since most kitchen appliances contain large amounts of steel and aluminum, the tariffs on those products have the potential to literally " The duties on plumbing fixtures, fittings and related plumbing components will result in higher costs for consumers, significant supply chain disruptions and a negative impact on growth and jobs." Kerry Stackpole, CEO/executive director, PMI November 2018 • 33

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