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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Tariff Issue Draws Mixed Reactions From Kitchen and Bath Design Pros SO HOW DO dealers and designers feel about the tariff situation? Opinions are all over the map, ranging from strongly held "for" and "against" positions to uncertainty to a feeling that it's a "non issue," as kitchen and bath professionals try to assess the potential impact, both short term and long term, of the U.S. tariffs on foreign imports, and determine the best way to address these in their businesses (see related Market Pulse, Page 6). Cheryl Clendenon, president of In Detail Interiors in Pensacola, FL, is largely optimistic about the situation. She explains, "We are taking no action as we expect it to be short lived for the most part. We will try and buy more domestic or European products and the only thing this has impacted for us so far is quartz. We have had many notices of tariff increases but most have been nominal… so far. Price increases are a part of any business and right now they are no more than the typical increases in costs that normally happen. In January this may change, and we will pivot accordingly. [But it's] much ado about not much in my opinion thus far." Karen Topjian of the Englewood, NJ-based MCM Designs is also taking a wait-and-see approach. She says, "It is still too early to say [what the impact will be] because the negotiations are still in play. There has to be long-range planning for our country, so we will see what happens and what and how much these tariffs are in reality. While it's good to prepare, it is just as important to understand why and how we gave away so much of our production. How do we level the playing field?" Others, however, are feeling the pinch right now – including Carla Mistretta-Gaeta of the Bernardsville, NJ-based Gemini Design Group LLC, who reports "a direct increase in pricing from 5-35% overnight" which she notes, "is impossible to absorb on outstanding quotes and sold jobs not delivered as of yet." Elana Riedel, president of The Cabinet Lady Inc. in Jurupa Valley, CA agrees: "We are already feeling the impact from the tariffs. Our cabinet, countertop and fixture vendors have all raised their prices. This results in us having to raise our prices. We have lost two jobs due to the difference in pricing when we quoted them originally and the new prices we're having to charge due to higher material costs. The difference has priced some of our customers out of the remodeling market. We are hoping customers understand that it is out of our control, and that we are not a 'bait and switch' type of company." David McLaughlin of Blue Sky Texas, in Austin, TX also vehemently opposes the tariffs, stating, "They are bad policy and end up hurting American consumers and workers, in addition to businesses. Expected tariffs on American products have ended all of my company's orders coming from Canada. Tariffs hurt profit margins of companies that use steel and aluminum to make goods, cause prices businesses must pay for their goods to increase and cause prices on consumer prod- ucts that use these metals to rise. Retaliatory tariffs hurt American businesses, consumers and workers as well. Still others see the tariff situation as a positive. As Paula Cook, sales designer at Kitchen Design Plus in Toledo, OH states, "I honestly think in both the short and long term, it will help my company. It will eliminate the confusion on quality of the product we are offering and make us competitive in the marketplace as it will all but eliminate the 'bottom of the barrel' products that are flooding our market that don't have the quality of what we offer. We know there will be growing pains with the tariffs, but we support them as we want to see good quality products for our consumers at a competitive price." Michael Voss, owner/principal at Studio V Designs in Nashua, NH also welcomes the tariffs. He explains, "We are of the position, where tariffs are related to foreign imports, specifically Chinese cabinets and stone products such as quartz, [that they] are welcomed. The majority of kitchen and bath showrooms in our area also support the need to implement the tariffs to encour- age more American-made cabinetry and associated products and ultimately make the playing field more equal. So far, we have received positive feedback. Many Americans are willing to pay a bit more to support retail organizations that support North American-made products." And some have mixed feelings, such as Dave Bleyenberg, co-owner of Premier Granite & Stone in Grandville, MI, who admits, "It has affected and will continue to affect our business," but notes, "we support the tariffs [despite this] because [we believe] it's proper and the right thing to do. We now will be sourcing more products from the U.S. and other suppliers. Overall, cost will go up for consumers just slightly, however [the positive effect is that] it's creating new business, putting people to work and creating jobs that have been lost in the past." Dealers and designers who mostly sell American-made products appear to be less concerned about the tariffs, though there's another wrinkle in the equation: Some dealers report seeing unaf- fected domestic manufacturers raising prices "simply because they can." As Rachelle Kiklowicz, president/principal designer As You Wish Interiors in Lakeland, CA notes, "I have heard some companies in the U.S. are adding the increases even though their prod- ucts don't come from China. That's dishonest and bad for American companies. So the ones that are playing that game need to knock it off." While the jury is still out on how the tariff situation will evolve, and what impact this will ultimately have on the kitchen and bath industry, dealers and designers agree that they will be watching the situation, and adjusting the products they source as needed. Ultimately, the precise impact of the tariffs on kitchen and bath consumers is likely to vary from company to company – and even project to project – because some manufacturers, retailers and importers may opt to absorb the costs of the tariffs in order to maintain compet- itive market share, while others may not. According to Conestoga, a leading supplier of cabinet doors, drawer fronts, drawer boxes and other components, "every cabinet manu- facturer in the U.S. is, or will be, affected by plywood cost increases," including cabinet brands sold through kitchen/bath dealerships and home centers. "This is a huge issue for every cabinet manufacturer," said COO Chris Watson, noting that recent tariffs on Chinese plywood imports have driven up prices across the board, since demand has now shifted to domestic suppliers who've raised their own prices. Early this fall, Conestoga informed cus- tomers that it had "absorbed" plywood cost increases for months, refusing to pass along price hikes as it worked diligently to establish new sources of plywood, both domestically and in countries such as Malaysia, Indonesia and Vietnam. The East Earl, PA-based Conestoga said, however, that it was "finally forced to react" in September, raising prices in order to offset raw-material cost increases and declining profit margins which – like for most cabinet/compo- nent suppliers – are thin to begin with. Consumers, said Conestoga, will ultimate- ly feel the impact of the tariffs in the form of rising costs. While it's "impossible" to determine the price impact on every project, Conestoga noted, its sample kitchen pricing "seems to indicate that an increase of 4-6% is to be expected." "Some jobs may see little to no increase, while others may see a much bigger increase," the company said. Price increases, Conestoga added, may depend upon how much of the af- fected plywood is being used and how complex the project is. Factors such as finishes or door designs may also play a role. According to Conestoga, current tariffs apply only to sheet goods laid up in Chinese mills, but do not affect flat-packed cabinetry manufactured and shipped from China, even though those RTA cabinets utilize the very same plywood. As a result, Watson said, suppliers can claim their cabinets are "made in the U.S." even though, in reality, they are only assembled in the U.S., using cabinet parts machined in China and shipped as flat-packed kits, thereby skirting tariffs. "Obviously, this is very frustrating to anyone building cabinets in the U.S.," said Watson, noting that U.S. manufacturers are "trying to ad- dress this loophole and are hoping for a change." "Countless other industries have also been affected by the tariff issue," Watson said. "We're simply being forced to respond to market changes." ▪ November 2018 • KitchenBathDesign.com 35

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