‘19% US tariff hardly any relief to furniture manufacturing sector’

‘19% US tariff hardly any relief to furniture manufacturing sector’

Cambodia exports a significant quantity of furniture, including upholstered seats, wooden furniture, and other items to the US.

Furniture manufacturers in the Kingdom worry about a sourcing shift in the US after 19 percent tariffs were finalised on Cambodia following trade talks between the two countries.

Cambodia exports a significant quantity of furniture, including upholstered seats, wooden furniture, and other furniture items, to the US. America is a major export destination for Cambodian furniture, with exports reaching hundreds of millions of US dollars annually.

Speaking to Khmer Times, an investor in the Kingdom’s furniture manufacturing sector, said that when all industries breathed a sigh of relief after coming to know that the US tariffs had been reduced from 49 percent to 36 percent and subsequently to 19 percent, one industry that continued to be gripped by panic was the furniture manufacturing sector.

“Compared to all other industries, furniture manufacturing and exports, operates on thin profit margins. This is because the wholesalers and retailers, conventionally, absorb the lion’s share of profits generated through sales while across other industries there is a more equitable distribution of profits between the manufacturer, exporter, wholesaler and retailer.”

He said retailers in the US wouldn’t want to reduce their profit margins and they tend to lose their market share if they pass on the price rise to the end consumers. “Naturally, this will lead to a source shift, where the retailers and wholesalers will select manufacturing markets with lesser tariffs.

“Until Cambodia substantially diversify its furniture export basket switching to new markets, 19 percent is definitely a big number that will adversely affect the furniture manufacturing industry in the Kingdom.”

Last week, a global news agency report quoted Ben Knepler, an American furniture importer, who is at the crossroads after the Trump administration announced reciprocal tariffs on Cambodia.

His company, True Places, had shifted production of outdoor chairs from China to Cambodia, after the first Trump administration imposed tariffs on China.

“We were facing 25-percent tariffs in China, and there were zero-percent tariffs in Cambodia,” Knepler said.

“It took me a year to move the massive equipment and molds to Cambodia only to see another steep levy.

“With Trump’s reciprocal tariff hikes taking effect last Thursday, these Cambodia-made chairs face a lower — though still significant — 19 percent duty,” he said.

The American furniture importer compared the rapid policy changes to spinning a “wheel of misfortune,” resulting in a new tariff each time. “Over four months this year, the planned tariff rate on Cambodian exports has gone from 0 to 49 percent, to 10 percent, to 36 percent, to 19 percent,” he said.

Furniture industry veteran Chris Lehnes opined on his LinkedIn page that Trump tariffs would force American furniture retailers to engage in strategic sourcing shifts to minimise tariff exposure.

“The timing also compounded the pressure. The tariffs took effect as the furniture industry was already experiencing intense competition from e-commerce players like Wayfair and Amazon.

“Rising costs due to tariffs made it harder for traditional brick-and-mortar retailers to stay competitive, particularly against companies that had more supply chains to negotiate better.”

khmertimeskh