Small furniture retailers face existential tariff threat, despite Supreme Court ruling

The Supreme Court struck down President Donald Trump’s so-called “reciprocal tariffs” on Friday. Whatever the ruling, there’s little consolation to be discovered for the furniture business.

Furniture importers are dealing with steep import duties after the business was hit with increased tariffs on objects resembling couches, kitchen cupboards and vanities final fall beneath part 232 of the Commerce Growth Act.

Whereas Trump’s country-specific “liberation day” tariffs imposed beneath the Worldwide Emergency Financial Powers Act and introduced in April have been beneath evaluation by the nation’s highest courtroom, the duties particular to furniture importers, of round 25%, weren’t.

Compounding the difficulty is a continuing thread of uncertainty plaguing the business, mentioned Peter Theran, CEO of the House Furnishings Affiliation, the commerce group representing furniture retailers.

The 25% responsibility on sure furniture imports was speculated to rise to 50% in January, however on the finish of December, that plan was pushed again to 2027. Its additionally turn into widespread over the previous 12 months for Trump to threaten new tariffs on numerous imports that by no means find yourself getting enacted.

“This can be a very, very tough time to handle what you are promoting,” mentioned Theran. “The No. 1 driver of the issue of managing what you are promoting is unpredictability and an incapacity to make different plans and put money into these plans, as a result of you do not know what tomorrow will likely be.”

Tariffs and the uncertainty they’ve introduced are the most recent blow to the furniture business, which has been struggling for the previous 4 years and was beneath strain nicely earlier than Trump’s commerce struggle.

In the course of the Covid-19 pandemic, when folks have been caught at dwelling and flush with money, many People took the chance to refresh their areas and purchase new furniture and decor. Then, low rates of interest introduced a surge in demand for brand spanking new properties, which served as a catalyst for furniture shopping for. 

The end result was outsized development throughout the house items business and growth instances for furniture.

However as inflation and rates of interest started to creep up in 2022, the sector began to sputter, and it later declined for the primary time in no less than seven years, in keeping with knowledge from Euromonitor. 

By the point tariffs got here round, dwelling gross sales had slowed and a few furniture corporations have been already struggling to maintain operations afloat and could not handle the sudden improve in fastened prices. 

American Signature Furniture, the father or mother firm behind Worth Metropolis Furniture, declared chapter late final 12 months after almost 80 years in enterprise. It started liquidation gross sales at its 89 remaining shops final month. 

In a courtroom submitting, the corporate mentioned the aftermath of the Covid pandemic, subsequent shifts in shopper spending and rising prices led to a 27% decline in gross sales between 2023 and 2025. Internet working losses ballooned from $18 million to $70 million throughout the identical time interval, it mentioned. 

By the top of 2024, the corporate was dealing with “important liquidity constraints,” which have been then “additional exacerbated and accelerated by the introduction of recent tariff insurance policies,” the corporate mentioned within the submitting. 

During the last 12 months, no less than 10 different furniture companies have declared chapter, with some liquidating and ceasing operations altogether, in keeping with a CNBC evaluation of federal chapter filings. 

A lot of the corporations are smaller companies, which have been hit tougher by tariffs as a result of they’ve fewer assets than their bigger rivals.

“The smaller gamers are positively those that would be the hardest hit as a result of they do not essentially have deep pockets, they do not have the economies of scale, they do not have the large sourcing groups that may abruptly look to pivot the vacation spot or the origin of the merchandise,” mentioned Neil Saunders, retail analyst and managing director at GlobalData. “So they’re beneath numerous strain, and we in all probability will see extra failures in that impartial house.” 

Joseph Cozza, whose small furniture enterprise East Coast Innovators provides retailers resembling Macy’s and Raymour & Flanigan, informed CNBC he was compelled to lift costs between 15% and 18% to offset increased tariff prices, resulting in a slide in demand over the vacations. 

For now, Cozza mentioned he can maintain his enterprise operating however is hoping for an rate of interest minimize, a jolt to the housing market and larger-than-expected tax returns to spur gross sales. 

“I am praying for that,” he mentioned. 

If not, he may need to maneuver his enterprise from Philadelphia to North Carolina, the place working prices are decrease, he mentioned. 

“I’ve a pleasant firm with good workers, and I pay all of them a very good wage, and I am being penalized,” mentioned Cozza. “I am being penalized for what I do, and I simply do not assume that is truthful.”

The arrival of tariffs has created a market seize alternative for bigger companies, that are higher outfitted than smaller companies to climate coverage adjustments and maintain costs decrease.

During the last 12 months, some massive and publicly traded furniture corporations have really been rising earnings and gross sales despite increased prices from tariffs. 

Throughout Ikea’s fiscal 2025, it was capable of maintain costs comparatively regular and income about flat in contrast with 2024, it mentioned in a information launch. It did report increased working bills however attributed the rise to an acquisition it made within the Baltics, not tariffs. 

RH, Williams-Sonoma and Wayfair have all grown gross sales and margins whilst they confronted increased import prices. 

Within the 9 months ended Nov. 1, RH noticed gross sales develop nearly 10% as margins expanded. At Williams-Sonoma, gross sales grew about 4% within the 39 weeks ended Nov. 2 whereas working margins grew barely. Wayfair, which reported fourth-quarter outcomes on Thursday, noticed income develop 5.1% in fiscal 2025 as gross margin stayed regular and working bills fell. 

Wall Avenue has but to see the total affect of furniture-specific tariffs on these corporations as a result of most of them final reported outcomes proper across the time the tariffs have been enacted.

However they already confronted a big selection of duties all through 2025. Most U.S. furniture imports come from China and from Vietnam and different components of southeast Asia, which have seen a variety of upper tariffs earlier than furniture-specific levies have been launched. At one level, imports from China have been tariffed as excessive as 145%, whereas Vietnam confronted tariffs of round 20%.

These country-specific duties have been those struck down by the Supreme Court. On the coronary heart of the case was whether or not Trump had the authorized authority to impose what he known as reciprocal tariffs, which critics mentioned infringed on the ability of Congress to tax.

A reversal of these tariff charges means much more uncertainty. Chief among the many questions now could be how the tariffs will likely be refunded and whether or not the administration will provide you with new methods to implement commerce initiatives.

“A CEO of one of many largest furniture retailers within the nation mentioned to me, ‘Even when tariff technique ended up with the worst attainable consequence for my enterprise, I might then create a plan, put money into that plan, execute beneath that plan and create the most effective consequence that is accessible,'” mentioned Theran of the House Furnishings Affiliation.

“Nobody can do this,” he mentioned. “Nobody can put money into a plan now, as a result of the tariff technique has not stabilized. It retains altering.”