New tariffs on furniture, drugs and heavy-duty trucks worry Long Island firms

Newly announced tariffs on upholstered furniture, medication and heavy-duty trucks are leading to worry and uncertainty among Long Island manufacturers and retailers — particularly small businesses — that were hit with import levies earlier this year.

"It’s a difficult situation to pass down the price increase to customers. Customers are not willing to pay. Because of what is going on in the tariff situation, people are not spending money to begin with," said John Garg, CEO of Jennifer Opco LLC, the Farmingdale-based holding company that owns the Jennifer Furniture brand.

On Monday, President Donald Trump said that tariffs of 10% on imported timber and 25% on kitchen cabinets, bathroom vanities and upholstered furniture will go into effect Oct. 14.

Last week, he announced tariffs of 100% on some prescription drugs and 25% on heavy-duty trucks will take effect Wednesday.

The tariff on kitchen cabinets will rise to 50% and the tariff on upholstered furniture will increase to 30% on Jan. 1 for countries that failed to reach an agreement with the United States.

The declarations follow a wide range of tariffs enacted throughout the year on trading partners of up to 50% and other levies on imported products, such as steel and autos, which Trump said were aimed at protecting domestic manufacturers and national security.

For example, tariffs on Chinese goods rose from 10% on Feb. 4 to 30% on June 11.

Some economic experts and retailers expect the new tariffs to lead to higher prices on upholstered furniture and heavy-duty trucks. However, health care industry experts are taking a wait-and-see approach to any possible impacts on drug costs.

Some companies have been able to eat the higher costs from tariffs enacted earlier this year instead of passing them on to customers, but that flexibility has limits and likely will translate into higher retail prices this holiday season, said Alex Durante, senior economist at the Tax Foundation, a nonpartisan tax policy nonprofit based in Washington, D.C.

Jennifer Furniture has four stores on Long Island and one in New Jersey, and it sells furniture online. The company’s products are manufactured at its plant in Greensboro, North Carolina, and by contract partners in Italy and China, Garg said.

Jennifer Furniture has been paying 30% in tariffs for months this year, and business is down 20% to 30%, due in part to high interest rates slowing down home sales, which have affected furniture sales, said Garg, who said his business has been sustained by revenue from a wholesale furniture upholstery business he bought with a partner last year.

Tariffs are a "hot-button issue" in the furniture industry "because if it eats too far into your margin, then you’re not making any money," said Tom Russell, editor-in-chief of Home News Now, a trade publication based in High Point, North Carolina.

Bill McLoughlin, editor-in-chief of Furniture Today, a trade publication also based in High Point, said it is unclear whether the negotiated tariff rates with China and Vietnam, which are the two largest upholstery exporters to the United States, would be covered by a statement the White House released Monday.

The statement said: "Trading partners who negotiate with the United States to address the threat of wood imports to the national security of the United States may be able to secure an alternative to the pending tariff increase."

Regardless, retail furniture prices are going to be affected, McLoughlin said.

"As far as what consumers should expect, the short answer is price increases. A large number of [furniture] companies began instituting price increases or tariff surcharges even before the most recent announcement," he said.

Wait-and-see approach

Area hospitals and other health care providers that rely on imports of branded or patented prescription drugs to treat patients are taking a wait-and-see approach to the 100% tariff that goes into effect Wednesday.

Northwell Health is "currently evaluating the potential impact of these proposed tariffs," said Joseph N. Kemp, spokesman for the New Hyde Park-based health care provider, which is the largest in New York State.

"Our priority remains ensuring our patients’ access to safe and effective treatments, and we will take all necessary steps to continue that mission," he told Newsday.

Trump, in a social media post last week, announced the new tariff would be imposed on "any branded or patented pharmaceutical product" from overseas unless the manufacturer "is building their pharmaceutical manufacturing plant in America."

Since Trump’s second term began in January, more than a dozen drugmakers, including Eli Lilly and AstraZeneca, have announced plans to spend a total of more than $350 billion on production, research and development and other activities in the United States over the next five years.

The 100% tariff is on top of a 15% tariff imposed over the summer on most drugs coming from Europe.

About 90% of U.S. prescriptions are filled with generic drugs, which wouldn’t be impacted by the 100% tariff, according to industry experts.

Alex Schriver, a spokesman for the Washington, D.C.-based trade group Pharmaceutical Research and Manufacturers of America, said the new tariff puts at "risk" the pharmaceutical industry’s domestic expansion plans "because every dollar spent on tariffs is a dollar that cannot be invested in American manufacturing or the development of future treatments and cures."

On Long Island, about 18,000 people work in drug and vitamin production, the largest segment of the manufacturing sector, according to Long Island Bio, a trade group based in Bayport.

Tom Mariner, the group's executive director, doubted the new tariff would have a wide impact on local drugmakers. Long Island Bio represents nearly 300 companies involved in biotechnology and the manufacture of drugs, vitamins and medical devices.

"Our people generally don’t do branded [drugs]. They do generic," Mariner said Tuesday. "I’m not hearing a lot from our members about this latest tariff."

For those that are impacted, he said, earlier tariffs on raw materials used in drug manufacturing "have left [businesses] better equipped than they were eight to 10 months ago to handle this."

'Sales are going to drop'

The uncertainty surrounding tariffs will likely drive further price increases in the heavy-duty truck industry, said Frank Kenney, senior director of industry solutions at Cleo, a Rockford, Illinois-based provider of software for supply chain orchestration.

"Whenever you have uncertainty, people tend to default to, 'I don't want to do anything,'" he said. "The freight economy responds to that by the supply getting tighter."

Also, when logistics become more expensive, he added, "someone is going to pick up that tab and, ultimately, it comes back to us."

Managing inventory for small businesses likely will become more complicated, as well, he said.

"It's going to slow business down," said Barry Milea, owner of Milea Truck Sales, a family-owned commercial truck sales, leasing and modification business with locations in the Bronx, Queens and Brooklyn, and "a good-size LI customer base."

"Sales are going to drop because people already have sticker shock coming out of the [COVID-19] pandemic," he said, adding that the company likely will need to raise prices.

"There's no way that the dealer is going to be able to eat that kind of increase. You're talking about 25%," he said. "A typical truck today costs $200,000. We don't make that kind of profit."

With Reuters