Impacts of the Reinstated Tariff on Chinese Luxury Vinyl Tile
On August 7th, 2020, The U.S. government reinstated a 25% tariff on Chinese Luxury Vinyl Tile (LVT), which is having significant effects on the industry at large. Many companies are working to figure out how to make this steep tariff work, while others trust the end goal.
Ultimately, the effects of this tariff are far and wide. What are the impacts of the 25% tariff on LVT? Will it hurt or help the market? Who’s winning and losing here?
Let’s break down this reinstated 25% tariff, so you understand how it might affect you and your business, moving forward.
History of the Tariff on Chinese LVT
LVT was developed and refined in China. As a result, the majority of LVT has always been manufactured there.
However, in 2018, The U. S. was in the midst of a trade war with China. The ongoing struggle for economic authority resulted in a 10% tariff for all vinyl goods imported from China– including luxury vinyl tile (LVT). In September 2018, the 10% tariff began.
The 10% tariff was set to increase to 25%, and by the spring of 2019, that’s exactly what happened. Luxury vinyl tile was now imported with an additional 25% tariff. However, in November 2019, the tariff was dropped again to 10%, with plans to be pushed back up to 25% again on August 7th, 2020.
On August 7th, as promised, the 25% tariff on Chinese LVT came back, which brings us to where we are today.
How will a hefty 25% import tariff affect the market?
The reason the tariffs happened in the first place was part of President Trump’s plan to bring manufacturing jobs back to the country. Spearheaded by U.S. Trade Representative, Robert Lighthizer, the administration has imposed tariffs on roughly $460 billion worth of imports.
The goal is that corporations who have outsourced manufacturing to decrease costs will be forced to manufacture again in the U.S.. In doing so, the country gains economic independence and brings long lost manufacturing jobs back to the country.
A portion of the market agrees with this goal and believe the ends justify the current means. However, the other half disagree, and for now, the numbers do, too.
The reality is that 70% of LVT is imported. Furthermore, the impact studies show that the tariffs aren’t having the desired effect. Instead, they’re just increasing the prices for consumers. For now, people are still importing from China and just charging customers more.
However, there’s a good reason for using China’s LVT, and there are also many other interesting things affecting the market condition.
Market Outlook and Effects of the 25% LVT Tariff
In 2003, LVT was 9.5% of the flooring market. By 2019, it had increased to nearly 25%. Rigid LVT accounts for around two-thirds of the $4.3 billion resilient flooring market. These numbers tell us that LVT is incredibly popular and has increased in demand year after year.
The question then is: can it continue to grow despite the 25% import tariff?
As of right now, China is the only LVT market that can completely support that demand. Both Taiwan and Vietnam are ramping up production in hopes of snagging up some of China’s business. Additionally, five U.S. producers have announced their intention to increase LVT production to accommodate the demand. However, things are getting hung up.
For American manufacturers to be able to produce all the LVT that China does, they need to be taught by Chinese manufacturers. Since COVID-19 erupted, this learning process has been halted, forcing the U.S. into a hiatus.
For now, most of the existing LVT manufacturing capacity is with rigid core LVT, which is pretty popular in the residential market. For those reasons, the residential market might be able to offset the tariffs with domestic manufacturing. However, the commercial side of LVT is more problematic.
Anytime a market is disrupted with manufacturing or supply cost increases, it’s going to have a wide-sweeping impact. Supply chains, capacity, and prices must be adjusted. The 25% tariff has to be dealt with somewhere.
Originally, when the tariff was just 10%, most companies and suppliers could absorb the costs. They figured out places to cut costs so that customers didn’t have to feel the increase. However, when the government increased the tariffs back up to 25% in August 2020, the only option was a price increase for consumers.
Some companies will pass the full 25% tariff on to their customers via price increases. Others will absorb a portion of the cost, so they pass less expense down to their customers. Everyone will respond differently.
How BuildDirect is Responding
It’s important to know what’s happening with the tariff on Chinese LVT, so you understand why LVT prices will increase industry-wide. However, it’s essential to note a couple of things.
As a contractor, builder, or architect, you’re familiar with the standard prices of flooring. However, the average consumer isn’t. People don’t purchase flooring frequently enough to recognize price increases. LVT’s value proposition and features will continue to provide value for your customers, so you shouldn’t have to worry about them being angry at you for any price hikes from you – because they won’t notice.
However, you are our customer, and that matters to us. We know that you’ll feel and notice price increases in your business. That’s why we’re committed to offering the best prices for quality LVT on the market.
Our goal is to make this tariff impact you as little as possible. We’re dedicated to providing low prices, and we’re keeping our thumbs on the pulse of manufacturing as well. With us, you know you’re getting the lowest price on high-quality LVT on the market.
Additionally, we offer an extra 5% credit for all your purchases when you sign up for our PRO Rewards program. It’s free to join, and it only takes seconds to sign up. Click here to become a PRO.