Kitchen & Bath Design News

AUG 2019

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

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opposed by recently formed alliances of import- ers, distributors, retailers, contractors and others who contend that the punitive duties, if imposed, would dramatically raise prices for imported RTA cabinets, ceramic and porcelain tile and quartz surfacing, having a calamitous effect on compa- nies and jobs that rely on those products. ASSOCIATION WARNINGS Trade associations with ties to the kitchen and bath trade have lent their voice to a growing chorus of objections over the imposition of po- tential new tariffs on products aimed at the res- idential-construction sector. Among the trade associations that have voiced concern, aside from the NAHB, are Plumbing Manufacturers International (PMI), the American Society of Interior Designers (ASID) and the American Home Appliance Manufacturers (AHAM). According to the PMI, which testified at June's government hearings, dozens of plumb- ing products and components – including toilets, sinks, shower heads and faucet handles – are included on the latest list of products targeted for tariffs. "These additional proposed tariffs will cause disproportionate harm to U.S. plumbing man- ufacturers, our workers, suppliers, distributors, retailers and American consumers," said Kerry Stackpole, executive director of the PMI, the association representing most major plumbing products manufacturers. The PMI said it is one of 150 trade associa- tions supporting "Tariffs Hurt the Heartland," a national coalition of organizations that contends that broadly applied tariffs are not an effective tool for changing China's trade practices but, in- stead, are nothing more than taxes paid by U.S. companies and consumers – not China. The PMI, along with other coalition members, have been pushing the Trump Administration to reach a resolution on trade issues with China and avoid additional tariffs. "Our members estimate they will incur mil- lions of dollars annually in added direct costs and expenses if the duties are implemented, not to mention millions of dollars of lost sales resulting from increased prices on these prod- ucts," Stackpole testified. "These are real dollars that will no longer be reinvested back into their companies and workforce." According to the PMI, tariffs will ultimate- ly cause supply chain disruption, artificially raise the cost of domestic production, stifle job growth, eliminate export markets for U.S. manufacturers and invite retaliatory tariffs on American-made products. The tariffs and the uncertainty they've created have also resulted in deferred investments and price increases to manufacturers and consumers, as well as de- layed decisions on home-buying and residential remodeling, the PMI said. "We agree that our trading partners must abide by global trade rules, and we support the administration's efforts to address unfair trading practices," Stackpole said, adding that the PMI encourages the administration to reset U.S.-China trade relations and negotiate an agreement that addresses longstanding struc- tural issues, improves U.S. global competitive- ness and eliminates tariffs. "We believe this goal can be achieved without taxing Americans." "We hope a final deal will resolve the structural issues that are at the core of the trade dispute and will fully protect American tech- nology, innovation and intellectual property," Stackpole said, adding that the PMI is eager for a swift resolution "that would remove the tariffs that the U.S. and China now impose on the bulk of products that move between the two economies. The economic harm to American consumers and manufacturers will only worsen if the Administration chooses to retain or add punitive tariffs against China," he observed. Several PMI members, including Moen, Inc. and LIXIL – whose portfolio includes Grohe and American Standard – concurred with that viewpoint, as did other trade associations. Indeed, according to AHAM, additional tariffs would have a direct impact on home appliance manufacturers, increasing costs and likely leading to higher prices for consumers. "As an industry, AHAM's members have been successful global traders for decades, and support free and fair trade that allows for unfettered competition that drives innovation and operation- al efficiencies in the marketplace," said Jennifer Cleary, AHAM's v.p./regulatory affairs, adding the tariff war "pulls consumers' homes into the middle of an international trade dispute." Impacted by current and future tariffs are dozens of components used in the manufacture of most major appliances, as well as numerous finished products, including refrigerator-freez- ers, ventilation hoods, microwave ovens, wine chillers and countertop ovens, AHAM said. "These tariffs – in addition to the tariffs on imported steel and aluminum upon which home appliance manufacturers in the U.S. rely – are taxes," Cleary said. "And higher prices for American consumers is the likely result of increased costs to import home appliances and the parts and materials needed to make and service them in America. American manufac- turing jobs could also be lost." While AHAM also said it supports the ad- ministration's goal of addressing China's trade practices, "we believe that these tariffs will not effectively do that…and will instead increase consumer costs and divert company resources away from innovating and bringing new fea- tures to their customers," the association noted. IMPACT MIXED, WIDE-RANGING But if opinions ab out the tariffs are widely mixed, so too is the impact the duties are having on dealers, designers, manufacturers, distribu- tors, importers, cabinet shops, remodelers, fab- ricators, builders and others across an industry that embraces myriad business models, targets multiple market niches, and serves high-end cli- ents, do-it-yourselfers and everyone in between. Most companies, for the time being, say they are simply trying to mitigate the impact of the tariffs. Many tell KBDN they're holding off on price increases and absorbing added costs while monitoring the situation. Others – including U.S. suppliers for whom demand has risen – have already implemented price increas- es to protect profit margins. Still others are seeking relief from their Chinese trading part- ners, stocking up on product to preserve prices should future tariffs be imposed, or searching for alternative supply sources in countries like Cambodia, Vietnam, India and Turkey. "I see the tariffs b oth positively and negative- ly," says Jeffery Eichenseer, director of mar- keting & product development for Conestoga Wood Specialties, a cabinet component supplier in East Earl, PA. "The 25% tariffs are helping our customers be a little more competitive with Chinese-imp orted cabinetry, which should re- sult in higher demand for our components. On the negative side, we import some wood compo- nents from China, which means higher pricing that we need to pass on to our customers." Plywood tariffs had a major negative im- pact on most of the cabinet industry, as U.S. plywood manufacturers took the opportunity to raise prices, says Eichenseer, adding that some cabinet component suppliers are attempting to find alternative product sources to avoid the tariffs, "but we've absorbed the first round and made some modest price adjustments." Others lean to an even-more-positive view of the tariffs. "The more tariffs imposed on Chinese cab- inet manufacturers, the healthier our business becomes," said Greg O'Bymachow of Solana Beach, CA-based GKD. "Quality, customer service and a better understanding by the end consumer of the quality of the products they're receiving – all go up substantially, to our benefit." "We believe we'll gain business because of the tariffs," said Chris Hansen, general manager " Our members estimate they will incur millions of dollars annually in added direct costs and expenses if the duties are implemented, not to mention millions of dollars of lost sales resulting from increased prices on these products." Kerry Stackpole, executive director of the PMI August 2019 • 83

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