Just 10% of IKEA products sold in the United States market are manufactured in the USA, making the world’s largest furniture retailer highly vulnerable to President-elect Donald Trump’s new tariff plans.
However, despite IKEA’s high reliance on imported timbers – which compared to Europe, where 70% of IKEA’s European products come from European forests, and 80% of IKEA’s Chinese products are manufactured in China – the world’s third-largest consumer of wood and wood-based products is already preparing life under Trump’s new universal tariffs.
That is, according to Henrik Elm, CFO of Inter IKEA, the company responsible for producing IKEA furniture and franchising the brand to retailers worldwide:
“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 on Friday about the impact of the new policies on IKEA’s supply chains.
Mr Elm spoke to Reuters on Friday after revealing that revenues fell 8.9% to 26.5 billion Euros 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.
Wood Central understands that Inter IKEA relies more on US imports than other regions, making it more vulnerable to tariffs. While information is difficult to obtain, Inter IKEA’s top five sourcing markets are Poland, Italy, Lithuania and Germany – which will be subject to a universal 10% tariff, and China, which could be subject to a 60-100% tariff on all imported goods.
Will Trump’s tariff plans crash the global economy?
In July, Wood Central revealed that President Trump’s plans to introduce 10% tariffs on all US imports will push the fragile world economy into recession by forcing up inflation, driving up interest rates, and further reducing weak consumer demand in the US, Europe, China, and Japan.
Trump’s policy is “very bad,” according to Alex Durante an economist at the US Tax Foundation. “Tariffs make consumers poorer. They shrink the economy.” The US, currently the world’s largest producer of forest products, is the highest per-capita industrial wood consumer and the second largest consumer market for lumber after China.
- To learn more about the impact of Trump’s economic policy on the global timber market, click here for Wood Central’s special feature.
