Fewer fake firs, higher prices: China tariff delay does little to save the holidays

Economic Times

2 days ago

Synopsis
U.S. retailers are reducing orders for artificial Christmas trees and decorations due to tariffs on Chinese imports, leading to fewer choices and higher prices for consumers. A temporary tariff reprieve came too late to significantly impact holiday inventory. While some businesses are attempting to expedite shipments, manufacturing bottlenecks and existing inventory levels limit the effect of this extension.
Agencies U.S. shoppers looking for fake Christmas trees and holiday decor this year will have fewer choices and face higher prices as tariffs on Chinese imports force retailers to scale back orders as they assess how tight customer budgets are. A 90-day extension to a tariff reprieve - agreed to by Washington and Beijing on August 11 - will allow retailers to rush in some last-minute shipments, but most holiday purchases are already done. Retailers typically import seasonal goods in advance because many products need six-month lead times. "We're going to have a lower supply year," said Chris Butler, CEO of National Tree Company, a New Jersey-based artificial tree importer supplying Walmart, Home Depot, Lowe's and Amazon. The company, which sources roughly half its trees from China and the rest from Vietnam, Cambodia, and Thailand, will hike prices by 10% to 20% on its Carolina pine, Nordic spruce, and Dunhill fir trees, Butler said. China is the biggest exporter of Christmas decorations to the U.S., accounting for 87% of such imports last year, worth roughly $4 billion, according to United States International Trade Commission data. "We're not overbuying (from our suppliers) because we're not sure about consumer demand and don't want expensive inventory on our books," Butler said.
Big retailers are more keen than usual to have National Tree ship directly to consumers rather than buying them as inventory, reducing the stores' risk on their balance sheets. Butler's rival, Mac Harman, CEO of California-based Balsam Hill, expects about 15% fewer trees in the market this season. "Even with the extended 90 days, it's too late for any of us to add orders," he said. Retailers started cutting orders after U.S. President Donald Trump flip-flopped on China tariffs - raising them to 145% in April, then cutting them to 30% a month later - because they are unwilling to buy trees at elevated prices, said Harman. He sources trees from around 80 suppliers, half of which are in China. Still, the latest pause has netted Balsam Hill some $2.5 million in savings, he said. A Walmart spokesperson said the company was confident in its inventory position heading into the holiday. Home Depot and Amazon declined to comment, while Lowe's did not respond to a Reuters request for comment.
'STILL TOO MUCH' The reduced demand for fake trees, a key Christmas purchase, signals a muted shopping season. Higher prices on essentials like diapers and dish soap have already strained budgets. Denim maker Levi Strauss said last month it will offer a leaner holiday selection. Isaac Larian, CEO of MGA Entertainment that makes Bratz dolls, said a 30% tariff on toys "is still too much." The company has raised prices, he said. Only goods shipped by air would benefit from the delay in higher tariffs, said Chris Rogers, head of supply chain research, S&P Global Market Intelligence. Companies including Apple that have upcoming product launches will gain from the certainty that there will be a 30% tariff, he said. Some suppliers, shippers, and retailers, however, started rushing extra orders after the moratorium was announced, industry sources said. While most footwear makers simplified holiday orders due to tariff uncertainty, a few are placing new orders to add variety to their inventory, said Matt Priest, CEO of industry group Footwear Distributors and Retailers of America (FDRA). It may not be simple to ramp up orders, though. Imports face manufacturing bottlenecks as brands that diversified to other countries after initial tariffs now face delays before new manufacturers can scale up, said Dave Tu, president of DCL Logistics, which imports for clients like GoPro. By and large, this tariff extension changes little for holiday imports. For most companies, said FDRA's Priest, holiday inventory "is what it is."