The tariff era is here. What do designers need to know?

Call it the trade war that wasn’t. On Monday morning, the world awoke to the news that President Donald Trump was bringing down the hammer—hard—with massive tariffs on Mexican and Canadian goods and (somewhat strangely) a far smaller take on Chinese imports. The stock market swooned. Headlines got big. Politicians issued proclamations of joy and doom.

By tea time, it was over. Mexico and Canada both announced deals on border security that seemed to placate the administration, and the tariffs on their countries are on hold for at least a month. The markets popped back up, and attention moved on to the next outrage. As you were?

What happens next is unpredictable. Tomorrow there may be a new country in the trade crosshairs, or a new wrinkle to the standoff with China. But one thing is clear: The early days of his second term in office have demonstrated that Trump is willing—eager—to use tariffs as a cudgel on the world stage.

Here’s why that matters for the home industry, and what designers need to know.

What’s the state of play?

Trump had initially announced a 25 percent tariff on Canadian and Mexican goods, and a 10 percent tariff on all imports from China. Canada and Mexico both negotiated a 30-day pause. The Chinese tariffs went into effect on Tuesday and were still active at press time. China is threatening to impose retaliatory tariffs on some U.S. goods starting next week.

How do tariffs work?

Tariffs are a tax collected whenever products or materials are brought into the country. The tax is paid by the importing company. For example, if an American brand designs lighting fixtures but manufactures them in China (a common practice), it will now pay an additional 10 percent duty to the federal government every time it brings its product into the States.

The same goes for parts and materials. If a U.S. manufacturer makes products domestically but imports component parts—the springs in a sofa cushion, for example—it pays tariffs.

Proponents of tariffs argue that they can be used to rebalance unfair trade practices or to spur on American manufacturing (if it’s too expensive to import goods, the thinking goes, companies will buy domestic). They can also be used as a tool of political leverage. Many economists argue that tariffs place arbitrary restrictions on trade and end up costing consumers and causing inflation—as many companies will continue buying abroad and end up raising their prices to absorb the tax.

What’s the history here?

During his first term, Trump levied tariffs on imported Chinese goods, including many home products—taxes that Biden largely continued when he won the presidency in 2020 (and which remain in place today). At first, the tariffs sent shockwaves through the industry, which imports billions from China every year. Prices did go up. However, over time, a variety of factors eased the initial impact.

For one, factories and importers worked out arrangements to share the burden of the tariffs without crippling their own businesses or sending prices through the roof. As a sidenote, some analysts partially blame the initial Trump tariffs for sending manufacturers down a spiral of value engineering, leading to an overall decline in furniture quality.

For another, production hubs slowly moved out of China as manufacturing companies looked to dodge the tariffs. According to an analysis by financial firm Stifel, China’s share of total U.S. furniture import dollars has dropped from 50 percent a decade ago to just over 26 percent over the past year. A huge volume of production has moved to Vietnam, with Mexico seeing gains as well.

That shift can be seen on a macro level, and also in the mix of how individual companies source. RH CEO Gary Friedman announced on a recent earnings call that the company would be pulling out of China entirely this year. Bew White, the executive chairman of the Gabriella White family of brands—Gabby, Summer Classics and Wendy Jane—says that it’s an industry trend that has only accelerated late last year after the election.

“Most of us started moving our production [out of China] five years ago, and we’ve moved all but about 20 percent. That [remaining] portion is almost impossible to move and mostly includes lighting,” White tells Business of Home. “We increased our inventory out of China dramatically and asked our vendors to ship everything they could before Chinese New Year so we wouldn’t be affected throughout the spring season.”

Simply put: The global supply chain has become more geographically dispersed and adaptable over the past decade. However, there are still billions of dollars’ worth of home goods produced in China that will be subject to the 10 percent tariff—if it holds.

How are industry brands reacting to these new tariffs?

The run-up to this Monday’s announcement was a chaotic time for many, especially when the expectation was for 25 percent increases on imports from Canada and Mexico (one executive half-joked that he had been trying out “deep breathing exercises” over the last few weeks).

However, while the rapid on-again off-again of these tariffs has caused whiplash, it’s also had the ironic effect of slowing down the pace of change. “The amount that happened in the past 24-hour period is insane,” says Josh Walter, the CEO of BrandJump, an agency that works with home furnishings companies to refine e-commerce strategy. “Brands are assessing the impact before they make any decisions, and because of what just happened with Canada and Mexico, they want to wait and see how this plays out a little bit [before making big changes].”

The fact that the tariffs have also come smack dab in the middle of the Lunar New Year—a time when most Chinese factory workers return home to celebrate with family—also throws a wrench in the works. “I don’t know if anything is really going on right now, because [the celebrations] are not over for two weeks,” says White. “So whatever happens doesn’t make any difference for the time being.”

Given the unpredictable nature of Trump’s tariff policies, some executives are wondering if making any moves—fast or slow—is wise. “I asked [a company I work with], ‘Are you guys going to move [out of China] to Vietnam?’ And they said, ‘No—who’s going to guarantee that Vietnam isn’t going to get a tariff in two months?’” says Suren Gopalakrishnan, an international sourcing expert and co-founder of MakersPalm, a company that helps brands and designers develop products and supply chains. “It’s expensive to move. It sometimes makes more sense for people to stay and take the damage.”

What kinds of companies and products will be most affected?

If the 10 percent tariff on Chinese imports holds, it will have a potential effect on a wide variety of home goods—China makes a lot of stuff. However, in some categories—case goods, upholstered furniture, textiles, for example—there is a more robust global supply chain, and importers have options if they’re dead set on dodging tariffs. For more specialized products—lighting, motion furniture, complex decor—China is the only viable option for many importers.

The size of the brand matters too. Big companies that place big orders have more negotiating power and, as such, more flexibility. Gopalakrishnan says that some large Chinese upholstery manufacturers—especially those who have operations in Vietnam or elsewhere—can partially absorb the expense of the tariff, easing the burden on the U.S. buyer.

However, the picture is different for smaller players—particularly in more specialized categories. Cara Barde, the owner and president of Crow Canyon Home, a California-based enamel tabletop brand, says that the 10 percent tariffs will have a significant impact on her 15-person company, which has partnered with the same Chinese factory for decades.

“There is no room for [the factory] to discount anymore,” she says. “We are at the max of what we can charge for many of our bestsellers. We will look at some of the products that may have some pricing flexibility, but we mostly need to look at our business expenses.”

While Barde has looked into moving production to other countries, she says the quality has never been high enough, or the costs never viable. “Companies like Target and Walmart have the resources and networks to absorb these changes. They have agents across Asia and can quickly find alternative suppliers. Small businesses like ours don’t have that level of diversification or buying power, which makes us more vulnerable to the impact of tariffs,” she adds. “Of course, if the tariffs were closer to 60 percent, we could have gone out of business, so 10 percent is not so bad in the grand scheme of things. But we are not Target. We are a small business. This is a big deal to us.”

What will be the impact on designers?

In theory, designers are well-suited to withstand the direct impact of tariffs. Brands at the higher end of the market typically do more domestic manufacturing, and have deeper margins to absorb any increase in their own expenses. It is likely that some prices will go up, but it’s unlikely that many designers will see a project’s budget immediately spiral out of control solely because of a 10 percent hike on Chinese goods.

However, tariffs might pop up in other ways. As the tax filters through the economy, it has the potential to increase costs for homebuilders and contractors, which can edge into design budgets. (In the brief window when the tariffs on Canada and Mexico were still a go, the National Association of Home Builders sent a letter to Trump imploring him to reconsider.)

Moreover, there’s the “vibe” factor. “My clients are basically recession-proof,” says San Francisco–based designer Melanie Coddington, who largely works with clients in the tech and finance industries. However, she adds that the general economic climate plays a role in their decision-making nonetheless. “They don’t necessarily want to spend if they feel like other people are hurting, or the economy is chaotic.”

What is ‘de minimis,’ and why does it matter?

Embedded in current U.S. trade law is a loophole called the ‘de minimis exemption.’ It means, roughly speaking, that tariffs don’t apply if the value of the shipment is less than $800. The policy is intended to ease the administrative burden on customs officials. However, through that shipping workaround, a massively disruptive business has emerged, as companies like Shein and Temu organize networks of factories into an online marketplace and send goods directly to U.S. consumers. Thus far, these companies have been successful mainly in selling apparel, but Temu has made headway into home goods—and Amazon’s recently announced Haul marketplace is another entry into the same business.

President Trump’s new tariff on China has closed the de minimis loophole—meaning that not only are goods under $800 not exempt, but they’re now subject to both the 2018 and 2025 tariffs. This change, if it lasts, will have a profound impact on the viability of businesses like Shein and Temu—not to mention direct-from-factory e-commerce brands that have flown under the tariff radar.

Will tariffs help domestic manufacturers?

It depends. Anecdotally, some U.S. manufacturers say that they have seen an increase in business since Trump’s election, as retailers hedge their bets against possible tariffs. However, the picture is complicated by the fact that many domestic producers rely on the global supply chain to source equipment and components. “If you’re increasing 10 percent to China, domestic manufacturing is increasing by 20 percent, because you’re still buying a lot of materials from China,” says Gopalakrishnan. “I think U.S. manufacturing will continue to grow, but it’s not going to replace Chinese manufacturing now.”

Barde—who says that domestic manufacturing is not viable for Crow Canyon Home—is blunt in her assessment: “10 percent tariffs on goods from China will not motivate U.S. companies to move manufacturing. All it does is tax U.S. businesses and increase prices in the U.S.”

If domestic home goods manufacturing will experience a significant resurgence, it will take time. “The move to take [manufacturing] out of the U.S. to China was a slow move. And now China has been doing it a long time, and they’re really good at it,” Skyline Furniture CEO Meganne Wecker told Business of Home last fall. “If it is going to come back, it’s going to take time—it could be a decade.”

What happens next?

President Trump is set to meet with Chinese leader Xi Jinping to discuss the burgeoning trade conflict. However, even if the 10 percent tax is lifted promptly, it’s not likely that Trump’s tariff era is over. On Monday, he told the BBC that tariffs “will definitely happen with the European Union” and might come “pretty soon.”