This month鈥檚 Real Issues. Real Answers. question deals with the impact of proposed and upcoming tariffs. There has been a lot of speculation around how steep tariffs and shifting timelines could affect housing and the 麻豆传媒 industry. What insights would you share with the 麻豆传媒 dealer who posed this question:
There has been a lot of news recently on higher tariffs between the U.S. and its trading partners, including Canada and Mexico. One concern that is top of mind for many 麻豆传媒 dealers is how these new tariffs will affect lumber and other materials sold at yards and stores across the country. How concerned should I be and what action, if any, can I take to protect my business?
Responses from lumberyards, full-line building material dealers, and specialty dealers/distributors:
鈥淪tock up heavy now and ride the wave. Things will straighten up.鈥�
鈥淭wo things: Buy what you can ahead of time. Second, be vocal at all town hall and other political gatherings.鈥�
鈥淎ll I can say is, 鈥楻oll with the punches.鈥� Keep a sharp eye on inventory levels and don鈥檛 make any rash moves. Steady as she goes!鈥�
鈥淣ew home building is slowing down.鈥�
鈥淲e have ordered material before the tariffs go into effect.鈥�
鈥淲e have been notified by several suppliers that they intend to increase their prices to us by 5% to 25% in response to tariffs on goods shipped after March 31. The amount of surcharge may vary daily, and will not be disclosed until the day the goods are shipped. This makes it difficult for us to price goods we sell to our customers. Ways to mitigate include: 1. Increase stock; 2. Contractually cap the surcharge we will accept, and cancel orders if surcharge exceeds that cap;
3. Search for alternative suppliers; 4. Increase our prices, as our competitors are also facing this increase in cost of materials.鈥�
鈥淲e will watch the market and take advantage of offers.鈥�
鈥淲e are keeping the builders aware of market prices to help them plan accordingly.鈥�
鈥淲hen the tariff goes on, adjust your prices that same day.鈥�
鈥淲e have no control of tariffs that make no sense and which will increase the cost for custom home builders dramatically.鈥�
鈥淒on鈥檛 quote too far in the future. Quote only subject to tariffs.鈥�
鈥淵ou should be very concerned and working on diversifying your supply chain and instigating pricing for your builder customers that focuses on uncertainty.鈥�
鈥淭he uncertainty is the challenge. Let鈥檚 make a decision and move forward.鈥�
鈥淛ust pay attention and run a great business and stay positioned for whatever comes. This is the same advice I would have given in the past. Some things don鈥檛 change!鈥�
鈥淏uy ahead when you can and then follow the market up with your pricing.鈥�
鈥淲e have no idea at this point whether they are going to implement and for how long. It鈥檚 a waiting game.鈥�
鈥�1. Negotiate better costs from your suppliers. 2. Source parts away from China. 3. Pass on the tariff costs to your customers. 4. Source parts to USA.鈥�
鈥淏e informed about what鈥檚 really going on with the tariffs.鈥�
鈥淲e are getting alerts of 25-45% increases in price.鈥�
鈥淎sk every vendor every time what they know. Keep an open mind for changing prices. Quote for limited time frames.鈥�
鈥淗onestly, I think everyone is searching for this answer, and no one truly knows. Some quick hits: 1. Open up communication with your vendors so you can have some prediction of when things might happen. 2. If you have products that you are top sellers that might slow with an increase, do you need to make a decision to bulk up and maintain a higher inventory level to help slow down the increases? 3. Are you pricing off market or weighted average (WAVG)? If WAVG, you can stock up and slow down how quickly you need to raise your prices.
4. Decide on the message you are going to put out to your customers when it鈥檚 time (would avoid politics) but you have to get ahead of the increase and not make it a surprise.鈥�
鈥淐ommunicate with customers and suppliers regularly. Keep things transparent when possible. Listen to what they have to say about their experience and finally take action as
a partner.鈥�
鈥淧rotect your inventory position. Buy before price increases when you can and follow market pricing to protect margins.鈥�
鈥淐onsumer confidence is low. Demand is soft. Trim unnecessary expenses.鈥�
鈥淲e are taking the position of building our inventories as able now to soften any future price spikes. Turning tariffs on and off inside of a 6-week contract delivery is a nightmare.鈥�
鈥淲atch the market and be upfront with your employees and customers.鈥�
鈥淭he uncertainty and flip-flopping is certainly a reason for concern and will impact business.鈥�
鈥淭he market is beholden to the whims of one person that changes his mind every week on the issue. You can鈥檛 have a stable society with these conditions.鈥�
鈥淭his is definitely an issue that demands attention and will need to be managed moving forward. There are a number of different ways to mitigate this issue, and we will have to make use of them all. First and foremost will be timely buying. Purchasing a reasonable amount of material before the tariff increase can enable you to keep your prices down longer. Maybe just as important is the ability to space out price increases because of the tariffs and not have to make large 25% or more increases all at once. Another avenue will be to look at alternative products that may be able to replace high tariff products at a more reasonable price. Finally educating our contractors and homeowners of the true impact of the situation will be vital. Some people will look at a 25% lumber tariff increase and see a 25% increase in the price to build their house. In a lot of situations, we can show our customers where a price increase on specific product groups while having an effect on the overall price, will not have the impact they may fear it will.鈥�
鈥淭ake it as it comes. Do the best you can. Life is a roller coaster.鈥�
鈥淩ight size your inventory, staff, and cash on hand. We are in for a rough ride.鈥�
鈥淲e are a single location, <$30M a year lumberyard. The biggest concern is the uncertainty. At some point, when this is called off, we will be sitting on product that is 25% higher than market. A lot of our product that will be affected get <25% GP, meaning we will have to sell at a loss to be competitive. This will hurt us greatly judging the uncertainty of how long this will last.鈥�
鈥淲hat specific actions to take are very difficult to gauge right now as this continues to be a very fluid situation where the chips get moved in different directions almost every day.鈥�
鈥淐urrently, our intent is to just keep the holes filled in the yard and not 鈥榩anic鈥� buy.鈥�
鈥淩aise your prices well before the increases take effect because when they come off you will have to take them off quickly based on past experience. Given the time of year as well, prices are going up to begin with so don鈥檛 let the tariffs erode your margins.鈥�
鈥淏uy early and average purchases into the equation.鈥�
鈥淚 believe this will be temporary.鈥�
鈥淲e are forced to carry more inventory and push higher margin into quotes since we will not know costs.鈥�
鈥淨uit freaking out, we are in this together.鈥�
鈥淣ot a concern yet. If you turned off the political news on TV and social media, you wouldn鈥檛 even know tariffs are on.鈥�
鈥淓valuate the cost increases and pass along what you have to.鈥�
鈥淚f we get a commitment on a large project, we buy out the material at that time. Margins are protected, in most cases, as we have used replacement costs as a basis for our pricing.鈥�
鈥淭ariffs will cause our raw goods cost pricing to increase, domestic will also increase along with the import.鈥�
鈥淲e are helpless to influence any of these decisions. Even if domestic producers could replace Mexican and Canadian vendors (they can鈥檛), their prices will go up also.鈥�
鈥淟umber tariffs on both sides should be abolished to increase unilateral trade.鈥�
鈥淭his is a wait and see. A lot of noise from the mainstream media. It could shift purchasing to U.S. companies.鈥�
Responses from wholesale distributors, manufacturers and service providers:
鈥淏e concerned. Lumber is the lifeblood of most 麻豆传媒 dealers.鈥�
鈥淪tay as vigilant as possible. Knowledge and timing is important. Be prepared to raise prices. We don鈥檛 have enough room in our gross margins to absorb 25% tariff/increase to the products we import so we will have to pass it on.鈥�
鈥淒epends on the demand for housing and remodeling in your particular area as well as affordability (Texas will not have as much of an impact as New England). Buy early, and keep in inventory.鈥�
鈥淣othing at this point, we will pass additional cost onto consumer. Nails are our primary business.鈥�
鈥淎ny business should always be aware of the fact that various trade issues are possible, if not likely, in some way or another to become a concern. The most important thing you can do is to be proactive to mitigate the effects on your business when you face the next supply chain challenge.鈥�
鈥淎ction: Build OUT your supplier base. Spread out product availability risk.鈥�
鈥淚 have always maintained multiple strong relationships with vendors across multiple supply channels. With an emphasis on always having strong U.S. partners, as either primary or secondary. We all deal with maintaining our competitiveness and profitability, however putting all your eggs in the cheapest import basket you can find is suicide in my opinion.鈥�
鈥淭ry to look at domestic manufacturers.鈥�
鈥淪tay focused on your business, and minimize political talk. Take away political banners. You don鈥檛 know how your customer votes.鈥�
鈥淟obby the U.S. government to end the 40-year conflict over softwood lumber. Make lobbying illegal, not logging.鈥�
鈥淎t some point you will lose customer confidence and business due to one of the following: poor quality from a bad container, inability to provide product period, or with the threat of tariffs losing your competitive edge and profit.鈥�
鈥淧rocurement diversification is now more important than ever. If you are still of the opinion that you are 鈥榣oyal鈥� and depend solely on a single source, wake up!鈥�
鈥淵ou don鈥檛 need to do anything except shorten your bid time.鈥�
鈥淧rice increases are a common occurrence. I view this as just another increase. However, the uncertainty of it can wreak havoc when trying to quote/plan for upcoming larger jobs.鈥�
鈥淭here will be price increases and you should make sure you keep up with the retails and move them up.鈥�
鈥淵ou should be concerned, yet it will ultimately be added to your cost of goods the same as everyone else.鈥�
鈥淎bsolutely nothing you can do other than make pricing adjustments as needed. We are all going to suffer the same expenses, just position yourself to take it in stride and not lose your focus.鈥�
鈥淚 would be very concerned as in the end prices will go up and frankly the USA can鈥檛 supply all needed products.鈥�
鈥淚f you had a crystal ball, and ample credit or cash, buy as much materials as possible and wait?鈥�
鈥淭he price of lumber fluctuates from season to season and from week to week. Lay in additional lumber inventory or hedge by buying lumber futures.鈥�
鈥淟et things play out. Trump is doing what鈥檚 best and fair for America.鈥�
鈥淢anufacture in the USA.鈥�
鈥淲e have expected prices to increase with the building season and tariffs will just make those increases much larger and set back any hope for affordable housing.鈥�
鈥淚t will cause inflation and slow demand. Brutal all around.鈥�
鈥淚nform your customer base, but don鈥檛 raise prices until they are actually in place for a few weeks (when you actually have higher priced goods on hand due to tariffs). When tariff relief is given to other countries, you will be the one with a better relationship than those preemptively pricing in the tariff. Good time to pick up new business while you鈥檙e working off of older costs.鈥�
鈥淐ontrol what you can control and be ready to pivot as our government leadership disrupts our industry and supply chains.鈥�
鈥淪tay on top of costs and immediately pass onto customers.鈥�
鈥淭here is no doubt that tariffs (depending on the level) will impact our businesses. Unfortunately, the lack of clarity in when/if/how much/with whom creates difficulty for those committed to making informed decisions. The only action I recommend is waiting until better information is available.鈥�
鈥淥bviously it will cause some consternation among end purchasers. Please remember though that our own Lumberman鈥檚 Association cannot supply a healthy building industry completely. Canada knows this and will just pass the increases onto the purchasers. Had we not been so narrow-minded, we might have had a new lumber agreement in place before this all happened.鈥�
鈥淚 feel that you should invest at the possible lower prices, but not too much to hurt yourself. Let your prices be a result of the economy.鈥�
Are you concerned that new or higher tariffs will negatively impact your company?
Comments from dealers:
鈥淪teel and other commodities are already moving up, raising costs to make all construction higher priced. Housing will become even more expensive for those in middle class, further eroding the American dream.鈥�
鈥淸Existing] tariffs as well as the chaotic rollout of Trump tariffs are potentially very damaging to our business.鈥�
鈥淎ll of our manufacturers are in Canada, Italy, Switzerland, and Germany. The on-again and off-again for tariffs to Canada, which is 80% of our vendors, makes it impossible to manage our business.鈥�
鈥淚鈥檒l reserve my concerns when all the tariff negotiations are done.鈥�
鈥淓specially with an issue that gets this much media attention, there is always going to be a concern of negative impact. The best thing we can do is educate our customers on the real and immediate issues and make sure they do not panic over the situation.鈥�
鈥淥ur fuel cost went up 10% due to Canadian tariffs, which can lower our bottom line by $30-40k per year.鈥�
鈥淭ariffs will bring higher prices and fewer sources.鈥�
鈥淸It鈥檚] going to raise most prices by 20% and make homes less affordable.鈥�
鈥淭he real issue is the U.S. pays way higher tariffs to those two countries then they pay the U.S. on our products. So we鈥檙e just making it an even playing field by doing it. Also, Canada flooding our market with their lumber when there鈥檚 plenty in the U.S. to sustain the U.S. market is another issue. The tariffs will help even the playing field. The U.S. has been taken advantage of way too long at the expense of our taxpayers.鈥�
鈥淰olatility is a bigger issue than higher prices. I am more concerned with buying the material at the higher tariffed price, and then having it removed a week later allowing competitors that waited to have a significant price advantage.鈥�
鈥淣othing has changed at this time. The competition around me (including box stores) has not raised any lumber prices since late December.鈥�
鈥淎sk yourself, would an artificial price increase benefit consumers?鈥�
鈥淭he only concern is in what form are they going to take? It鈥檚 a lot of noise now, people get too wrapped up in the media.鈥�
Comments from vendors:
鈥淲e鈥檙e a service provider. We save companies money when markets go crazy.鈥�
鈥淲e import products from Canada, China, etc. We unfortunately imported from Canada on the two days the tariffs were in effect and got taxed the 25% on the product.鈥�
鈥淚mpact on overall demand.鈥�
鈥淚t will be painful for the short term but in the end will drive growth of manufacturing again in the U.S.鈥�
鈥淎mateurs in government are making decisions they know nothing about. The sad part is we are going to upend [businesses] and reduce inventory and every small town in America is going to feel it. Don鈥檛 panic, review your inventory mix, cross train your employees, and maybe go into installed sales. Now is the time to ask your employees for ways to improve your business. Remember, they care too.鈥�
鈥淎ll the uncertainty and constant changing is the ridiculous part, but it鈥檚 understood that it鈥檚 most likely a negotiating tool.鈥�
鈥淢y supplier just increased the price on one item I buy in volume by nearly 20%.鈥�
鈥淭here is a serious shortage of housing (especially in the Northeast) and added tariffs on the cost of the main building component (lumber) will make it more difficult for home building to reach the level needed to impact affordability. Additionally, if exports drop due to increased raw material cost (metals) going into products exported by U.S. it will negatively affect wood crating for these exported products.鈥�
鈥淲e are in a global economy. This trade war is extremely unnecessary.鈥�
