Trump ramps up trade war as tariffs on lumber and furniture take effect

The tariffs come in addition to import taxes Trump has already imposed on cars, steel and other goods. And they take effect as Trump is engaging in a high stakes game of chicken with China, one of America’s biggest trading partners, which could end up derailing trade and slowing the US economy.

On Friday, the president said he might add an additional levy of 100% to all products from China beginning Nov. 1. Beijing last week placed restrictions on its exports of rare earth minerals, which could be crippling for American and European makers of semiconductors, electric vehicles and other products.

The S&P 500 index ended Friday down more than 2%, its steepest one-day slide in six months. But stocks rebounded strongly Monday after a social media post by Trump saying, “Don’t worry about China, it will all be fine!”

“Highly respected President Xi just had a bad moment,” the president wrote early Sunday morning. “He doesn’t want Depression for his country, and neither do I. The USA wants to help China, not hurt it!!!”

Speaking Sunday, the president appeared to walk back some of his earlier threats. He said “right now” the plan was to put tariffs on China on Nov. 1 but also added: “let’s see what happens. November 1st is an eternity.”

The Trump administration on Tuesday also started imposing fees on Chinese-owned ships docking in American ports, to try to revitalize American shipbuilding. China’s Ministry of Transport threatened retaliation Friday, saying it planned to hit American vessels with fees when they docked in China. On Tuesday, the Chinese government sanctioned five subsidiaries of Hanwha, a Korean company that is helping the United States build ships.

The president is facing a legal challenge at the Supreme Court which could declare his tariffs on China, as well as other countries, illegal. The court case does not pertain to the president’s tariffs on furniture and lumber, which were issued under a different national security-related trade law, Section 232 of the Trade Expansion Act of 1962.

Some critics have called it a stretch to issue the furniture and lumber tariffs under the national-security-related law. A proclamation put out by the Trump administration in late September said that wood products were “used in critical functions of the Department of War,” including building infrastructure for personnel and for transporting munitions, and therefore deserved protections.

Scott Lincicome, the vice president of general economics at the Cato Institute, a libertarian think tank, wrote in a blog post this week that the idea was “absurd.”

“If war broke out tomorrow, there would be zero concern about American ‘dependence’ on foreign lumber or furniture, and domestic sources would be quickly and easily acquired,” he said.

The tariffs going into effect on Tuesday include:

— 10% on imported wood and timber, much of which the United States imports from Canada.

— 25% on imported upholstered furniture, including sofas and chairs, which is set to rise to 30% on Jan. 1.

— 25% on kitchen cabinets and bathroom vanities, set to rise to 50% on Jan. 1.

Some American manufacturers lobbied for the tariffs, saying they need protection from a flood of low-priced foreign goods that threaten to put them out of business. But the tariffs will pose a challenge for many retailers who import products from around the world.

Farooq Kathwari, the CEO of Ethan Allen, a furniture retailer, said his company was better positioned than most because it manufactured nearly half of its products in the United States. Much of the rest is made in Mexico and Honduras.

“Tariffs are affecting us less, but it certainly is going to affect our industry,” he said.

Some manufacturing is likely to move back to the United States because of tariffs, Kathwari said, but it will take time. The high cost of labor is among the challenges that have made it difficult for Ethan Allen, which has factories in Vermont and North Carolina, to make furniture in the United States, he added. In particular, high medical costs were making America “very uncompetitive,” he said.

“Getting manufacturing started in the U.S. isn’t easy,” Kathwari continued. “We have all these hurdles.”

Arin Schultz, the chief growth officer at Naturepedic, an organic mattress and furniture manufacturer, said he was raising prices and considering switching suppliers to deal with the tariffs.

The company makes its mattresses at its factory in Chagrin Falls, Ohio, but it imports furniture and materials including textiles from Sri Lanka, Vietnam and Pakistan. Naturepedic also planned later this year or early next year to start selling an organic upholstered headboard made in India, which would be subjected to Trump’s tariffs on upholstered wooden furniture.

Even before the latest tariffs on wooden products, the company intended to raise prices 5% to 10% on average on its products beginning in November now that it has exhausted the stock of raw materials it bought before tariffs took effect.

“We’re not trying to pass the cost off to our consumers completely,” Schultz said. “We’re still going to be eating a good amount of it.”

Some economists expect the higher price of lumber, along with home furnishings, will slow the pace of home building in the United States. That could set back the Trump administration’s goals of improving a weak housing market.

“It runs counter to the goals of making housing more affordable,” said Daryl Fairweather, chief economist at Redfin, a real estate brokerage. “In the end, you’re just going to get fewer homes built.”

Anirban Basu, the chief economist at Associated Builders and Contractors, a trade association, said the tariffs could benefit some domestic producers including custom upholsters, domestic cabinet makers and carpenters. But many of these industries are labor intensive, making it hard to manufacture in a country like the United States where labor costs are high.

“What that means is, the prospects of those forms of production moving to America are rather slender,” Basu said.