Chicago—Get used to navigating the tariffs; they’re likely to impact your business for the foreseeable future. That’s the message that Brian Beaulieu, CEO of ITR Economics, conveyed to attendees during his keynote speech delivered here at the NAFCD+NBMDA annual convention.
Impact on flooring industry
Self-described as unabashedly anti-tariffs, Beaulieu discussed the potential impact on the flooring distribution community and the country at large. “My bias is the same as the last 20 Nobel laureates in economics—tariffs distort the marketplace, tariffs encourage inefficiencies and tariffs are a form of the government meddling in the marketplace, which is never the best outcome for a capitalist society like ours,” he explained.
“Tariffs are primarily a tax imposed upon imports. Not just our studies but other studies show that about 55% to 60% of the tariff is paid for by the consumer. More than 25% is paid for by the importing entity and a lesser percentage is paid for by the person doing the exporting, i.e., out of China, out of Europe, out of Mexico or out of Canada. But the U.S. consumer bears the brunt of this—and it is inflationary. You need to understand that these tariffs—while the uncertainty is going to go down—the tariffs aren’t going away.”
Not anytime soon, anyway. ITR Economics estimates tariffs will be a major factor impacting business through 2034. “I’ve studied tariff history in the United States in particular, and the reality is after about two to three years, you’ll know exactly how to work the system,” Beaulieu told attendees. “It becomes part of what’s normal. It’s like Stockholm Syndrome—it becomes the norm. We’re expecting that around 2034, these tariffs are going to get lifted. They’ve always been lifted before in our great republic’s history because it becomes evident at some point in time that the distortions and the negative effects of tariffs outweigh any hope for positive change or any hope for benefits. That’s why we believe they will get lifted.”
Tariff outlook
The ultimate outlook of the impact of the tariffs on the industry, according to Beaulieu, largely depends on the Supreme Court’s pending ruling on the legality of President Trump’s tariff policy. (As of press time, the court had not yet rendered a ruling.) He did say that as quickly as these tariffs came on, they can be removed even faster. “I don’t know what the Supreme Court’s going to decide,” Beaulieu noted. “That’s going to alter the landscape if the Supreme Court goes against the Trump administration. But it’s not going to take away all of the tariffs—just some of those tariffs.”
High costs will hurt later
The primary objective for managers amid the uncertainty, according to Beaulieu, is to focus on lowering the cost structure of your businesses.
“If/when the tariffs fall away, you don’t want to be the person standing there with the highest cost structure, whether it’s U.S.-based or globally based,” he explained. “With tariffs, instead of having to compete with the whole world, all you’re doing now is competing based on an adjusted platform, cost platform created by the tariffs. So you keep fighting that fight because, in my world, it’s inevitable—your cost structure will be exposed out there in the future at the worst possible time.”
More broadly, according to Beaulieu, tariffs strike at the core of international trade. “Nationalism is where we are at; globalization is dead,” he said. “And all the things that we’ve benefited from in terms of globalization are now being denied to us. One of the benefits of this nationalism, though, is that we are developing shorter supply chains. That brings more business opportunities. Just be sensitive to those.”
Tariffs also stand to impact the level of foreign direct investment (FDI) in the U.S. But not as some have expected. The Trump administration, as part of its global trade strategy, has strongly encouraged foreign countries to establish manufacturing operations in America in return for more favorable tariff rates. But the early results are showing mixed results. “I thought for sure most of the foreign direct investment would be coming into the right-to-work states—the Sunbelt states—but I was amazed at how many are going into Indiana and Illinois and union states. They’re even going into California, for some reason.”
Catch-22 scenario
The challenge with overruling the new tariffs, experts say, is removing a revenue stream for the federal government. In a separate NAFCD presentation held the day before the ITR Economics session, Alex Hendrie explained the dilemma. Hendrie is the vice president of government relations for the National Association of Wholesalers (NAW). He said the government must find new revenue to fund the administration’s tax cuts. He noted that repealing the new tariffs would remove a revenue source. It could also create a nightmare scenario if the government has to refund the tariff fees already collected.
“Tariffs and taxes are really two sides of the same coin,” Hendrie told attendees. “On one side you have tariffs and tax policies on foreigners, and then there’s the U.S. taxes on businesses and individuals here. With Trump focused on reshaping U.S. revenue sources, there is a greater reliance on tariffs while at the same time cutting taxes on U.S. businesses and individuals. When you add the numbers up side by side, the amount of taxes that were cut roughly equals the amount of tariffs the government is currently collecting.”
NAW’s research
According to NAW’s research (which ITR Economics later refuted), the U.S. has collected $31 billion in tariff revenue. ITR Economics disputed those figures. Treasury is projecting $300 billion. By Hendrie’s count, that’s 4x the increase from 2024. Because the government is phasing them in over time, many tariffs won’t take effect until later. Many pundits agree that tax cuts add to an already high deficit. Removing a revenue stream without replacing it could make the situation worse.
“That means, politically, we can’t really get rid of these tariffs even if we want to,” Hendrie posited. “There’s an increasingly budgetary need for these tariffs. And if they were to go away, then they’re going to have to find hundreds of billions in revenue to offset that. So this creates the political problem. A future administration will have to answer for why you are increasing the deficit by X hundreds of billions of dollars if you remove the tariffs?”
Distributors are strategizing for the future
In the meantime, distributors are strategizing to source product and remain profitable and efficient amid the tariffs. For Dori Blitzstein, vice president of Maryland-based Roesel-Heck, achieving success in the current environment will require making the right adjustments. “Given what we heard from Brian Beaulieu in the ITR Economics session, we are certainly thinking about best ways to position our company with competitively priced products,” she said. “The easy route is to absorb those extra costs and maintain the business that we’ve built. The challenging route is to share the costs with our customers and with that comes a lot of educating and explaining. Service, stock levels and ease of delivery become more important conversations to us when we take pricing out of the equation.”
“Given what we heard from Brian Beaulieu in the ITR Economics session, I’m thinking about how I’m going to position our company moving forward in a different way than we’re reacting right now,” she told FCNews. “We’ve been trying to not pass on as many of the tariff expenses as possible and just cutting our margins so we can still remain competitive. But I feel that we have to make sure that we are looking out for our profitability moving toward 2030. And I don’t know if we can be lower than everybody else for the next four or five years. I think we’re going to have to start passing that along, because these tariffs aren’t going to go away.”
Like many other flooring wholesalers, Roesel-Heck is pursuing an alternative supplier strategy. “Moving out of China is key and it has been our goal,” Blitzstein said. “Over the past few years, our manufacturers got ahead of the tariffs and moved countries. However, when transitioning from one country to another, even if the colors remain the same in a product line, the clicking mechanisms change and the sheen levels change. It becomes a challenge to distributors inventorying products. So yes, our suppliers are sourcing from different countries. We can’t avoid imported products as they provide the best price and the consumer is shopping. We must remain competitive. Are we looking for domestic products as well? Of course! But finding USA products, specifically glue-down, has been problematic.”
The power of being proactive
Austin Starnes, COO of Memphis, Tenn.-based BPI, the industry’s No. 5-ranked distributor, said the key is to remain proactive. “We stay on top of the tariff announcements as soon as they’re released and evaluate how they affect our product categories. From there, we determine our strategy and communicate any changes to our customers as quickly as possible. Even in fast-moving situations, we try to maintain a 30-day notification window so our customers have time to plan.”
BPI currently sources about 65% of all its goods from the U.S., leaving 35% imported. And while it has moved out of China, keeping up with all the different various regions and the different tariffs has been tricky. “The hard part now is staying current on what’s happening in different regions and understanding how new tariffs impact the business,” Starnes said. “It takes constant attention to protect margins and stay competitive.”
At UCX, the industry second-largest distributor, focusing more on domestic suppliers is the name of the game. “We try to partner with a lot of national brands that are domestic,” said Brian Green, chief sales marketing officer. “We also have our own brands, and we have a sourcing team that has direct factory relationships. So for us, it’s making sure that we work with those factories to ensure that if they make a quick decision to move out of a country, that we understand, ‘Hey, is the quality going to be there? Is it going to be as consistent as it has been?”
NAFCD vendors rise to the occasion
The 2025 North American Association of Floor Covering Distributors + North American Building Material Distribution Association (NAFCD + NBMDA) convention took place here at the Hyatt Regency amid robust attendance. Organizers reported 7% higher attendance this year than the 2024 event, including 62 first-time attendees and 30 first-time exhibitors.
Following are some highlights from the show floor:
(Look for more on the 2025 NAFCD convention in upcoming issues of FCNews.)
