With over 40 years of experience, Love Dodd of Victoria believed they had seen all the furniture business could offer them.
But even he almost jumped out of his chair when he saw the scale of the new tariffs being applied to much of his merchandise earlier this month.
“We have personally received a few hundred thousand dollars,” he said in an interview. “It was a big blow for us.”
On May 5, the federal government tariffs imposed up to 295 percent on upholstered furniture imported from Vietnam and China. With three furniture stores on Vancouver Island, Dodd says the impact on his business, which employs about 80 people, was almost immediate.
He remembers a customer who recently came to one of his stores and tested a recliner for $ 698. “If they come to my store today, it will cost $ 2,598,” he said. “It’s not affordable.”
Ottawa imposed tariffs after half a dozen Canadian furniture makers complained that products from Vietnam and China were dumped in Canada at extremely uncompetitive prices.
Winnipeg-based Palliser Furniture is the company that started the process. Although he declined an interview request, the manufacturer’s letters to government officials set out his reasoning. According to government data, about $ 475 million worth of sofas and upholstered chairs subject to the new tariffs are imported into Canada each year, the majority of which come from China.
Palliser says that less than 20 years ago, Canadian manufacturers produced well over half of these items sold in Canada. Today, it’s barely a sixth.
According to Palliser, the flood of cheap products, mainly from China, is hurting Canadian businesses. “There has been a significant loss of jobs across Canada due to unfair competition from China in particular,” read one of the company’s submissions to the Canada Border Services Agency.
Exporting items at prices below what they cost to produce is known as dumping, and this is a contentious issue in international trade law.
Although unpopular with consumers, tariffs are one of the most direct instruments available to governments seeking to level the playing field.
Complaints about unfairly priced Chinese and Vietnamese products have been a long-standing problem in the furniture industry, so while Dodd says he had an idea for something to come, he expected tariffs. of the order of 10 to 20%, similar to what the United States recently implemented.
But at four times the sticker price for some products, sales have slowed to a ramp as customers balk at sky-high increases, he said. While about half of its upholstered merchandise is locally sourced, the other half has been bypassed by tariffs.
“If we can’t continue to deliver products to our customers and have goods for them, we don’t have sales,” he said. “We probably need to scale down our operations.”
The tariffs imposed so far are preliminary, meaning they may be raised, lowered or removed altogether when the government completes its investigation into the matter later this summer. But it is clear that the government already thinks dumping is a problem.
“The Canada Border Services Agency is of the opinion that there is evidence that [furniture] originating in or exported from China and Vietnam were dumped and subsidized, “the CBSA said in explaining the ruling.”[And] there is evidence which provides a reasonable indication that such dumping and subsidizing has caused and is threatening to cause injury to the Canadian domestic industry. “
In addition to declining sales, Dodd faces a large number of customers canceling orders as they have to pay higher prices as the items they ordered have not yet been imported and will be subject to tariffs. He has already spent thousands of dollars in tariff costs that he will have to pay for items that are already en route to Canada, he said.
But he tries to minimize the financial impact by stopping all further delivery unless he’s sure he can sell the items at a higher price.
“I have canceled almost 35 containers of product by the end of the year,” he said. “That’s $ 1 million in sales.”
Dodd says the industry needs access to mass-produced products from overseas in order to compensate for more limited Canadian production, but some local manufacturers disagree.
Dino Colalillo, the owner of Edgewood Furniture in Woodbridge, Ont., Says he’s happy the government has finally stepped in to help manufacturers like him.
“It’s justified, maybe 10 years too late,” he said in an interview.
He said the domestic furniture manufacturing industry in Canada is a shadow of what it once was because manufacturers in China, Vietnam and elsewhere have flooded the market with mass products whose costs are subsidized by their local governments.
“A lot of places just gave up and closed,” he said of Canadian industry.
According to Statistics Canada, as of 2017, Canadians purchased an estimated $ 148 million worth of sofas and upholstered chairs made in Canada. Last year that figure fell to just $ 115 million.
WATCH | A furniture maker explains how foreign products hurt competition:
Colalillo said most of the manufacturers that still exist have differentiated themselves by offering more customization in terms of different fabrics and colors, as they cannot compete with foreign mass-produced items.
“For the industry, it’s good,” he said of the tariffs. “It kind of pushes retailers to try and buy more Canadian products.”
“I applaud the government for actually doing something about it, well. I just hope it stays.”
But Melissa and Sacha Leclair, owners of Ottawa furniture store LD Shoppe, say they wish the government had also considered the impact on consumers and retailers, rather than just manufacturers.
The Leclairs work hard to source locally, they said, so only about 10-15% of their products have been hit by tariffs, mostly very specific products with a style they can’t find. national supplier.
“There are a very small number of manufacturers in Canada that produce something similar,” said Sacha, president and chief creative officer of the company. “There aren’t really any options to be successful at the national level.”
A look at the LD Shoppe catalog highlights just how drastic the impact can be. The best-selling item is the Darcy Swivel Chair, which costs $ 1,419. But a note on this article’s page on the website warns customers that the chair now comes with a price tag of $ 1,351, nearly doubling the price.
WATCH | The pricing plan needs tweaking, says the Ottawa store:
It is disheartening to have to walk around the showroom and remove items so as not to mislead customers, because “it is now unsaleable,” said Melissa, CEO of the company.
“Doing this to small businesses in the midst of a pandemic, when our stores were already locked out,” Sacha said, “it was just like kicking us while we’re on the ground”.
Things can change
Mark Warner, commercial lawyer at MAAW Law in Toronto, says while tariffs of up to 295 percent are undoubtedly hard to swallow, Canada is unlike other countries when it comes to disputes. commercial. The government is required by law to consider what is in the public interest with regard to the implementation of remedies.
“It will be interesting to see first if these preliminary duties hold up … and second, if a group of aggrieved consumers decides to launch a public interest. [argument],” he said.
In that case, he said, the government may determine that it is not in the public interest, in the midst of a pandemic, “to force Canadian consumers to pay 300 percent more for a sofa ”.
If the price hike isn’t enough of a deterrent, Love Dodd says the tariffs are also causing another potential shock for all Canadians buying furniture right now.
“With products made in Canada, we anticipate a one-year wait right now,” he said.
“You’re going to see a lot of half-empty stores.”