Just 10% of IKEA products sold in the United States are manufactured in the region, making the world’s largest furniture retailer (arguably) the world’s most vulnerable company to Donald Trump’s “Liberation Day” tariffs announced today.
“This is one of the most important days, in my opinion, in American history. It’s our declaration of economic independence. Jobs and factories will come roaring back into our country, and you see it happening already. We will supercharge our domestic industrial base,” President Trump told reporters at the White House.
Wood Central understands Inter IKEA – IKEA’s US division relies much more heavily on overseas imports than other regions, certainly more so than in Europe, where 70% of its European products are from European forests and China, where 80% of IKEA’s products are manufactured in China. And whilst information is difficult to obtain, Wood Central understands that Inter IKEA’s top five sourcing markets include Poland, Italy, Lithuania, Germany (subject to 20% tariffs on imports), and China (now subject to a 34% tariff).
“The problem for big box manufacturers is that the tariffs, whether through design or not, could disproportionately hit high volume, low value goods used in furniture, cabinetry and other structural and non-structural products if and when the tariffs eventually apply to those products,” according to an expert with knowledge of global supply chains. “Absorbing a 10% tariff is one thing, but factoring in a 20% to 40% tariff without passing on increased prices to the consumers is challenging.”
“It’s clear that Trump’s liberation tariffs are part of a push to ‘free up the forests’ and supercharge American manufacturing, but the complication, at least for global multinationals like IKEA, which is committed to sourcing FSC-certified timber products, is getting access to the fibre.”
As it stands, IKEA is the world’s third-largest timber consumer, responsible for about 1% of the global demand for lumber. Yet, according to FSC International, just 14.7 million hectares of US forests are certified under FSC’s certification scheme. At the same time, SFI—the United States PEFC-equivalent—has about 33 million hectares of forests under certification.
“This begs the question, is there enough FSC (or for that matter, SFI and PEFC) forest fibre to meet demand in the United States, now one of its fastest growing markets, should they instead manufacture products in the USA?”
Last year, Henrik Elm, Inter IKEA’s CFO, said the company was preparing for life under Trump’s tariffs.
“We have worked a lot on making our supply chain more responsive to different changes, including different trade barriers, etc., so I think we are better equipped than we have been ever before, (but) then, of course, we are not immune to changes.”
Henrick Elm, CFO of Inter IKEA – who spoke to the Reuters about the impact of Trump’s policies on IKEA’s supply chains.
Mr Elm spoke to Reuters after revealing that revenues fell 8.9% to 26.5 billion Euros (last November) after IKEA cut prices despite rising material costs. It comes just 12 months after the world’s largest IKEA franchisee, Ingka Group, announced plans to finally divest its Russian assets and instead invest more than 2 billion euros (or US $2.14 billion) to rapidly expand IKEA’s presence in the United States.
Will Trump’s tariff plans crash the economy?
In December, Wood Central reported that Trump’s tariffs would add billions to the cost of timber products, sparking a trade war over lumber, one of the world’s most traded bulk goods.
That is according to an analysis prepared by the Peterson Institute of International Economics would have major implications for the $50 billion trade in wooden products: “That’s because there is no such thing as a free trade tax,” according to a report prepared by Julieta Contreras, Mary Lovely and Jing Yan, who warned that low-income Americans would be hit hardest by the tariffs, which will add at least $25 billion to the cost of timber imports alone.
- To learn more about the impact of Trump’s economic policy on the global timber market, click here for Wood Central’s special feature. To learn more about Trump’s new tariffs on Chinese imports, including millions of timber furniture pieces, click here for Wood Central’s story.
