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Sales Tax On Furniture Imported From China Fails To Halt Rise In Asia-Made Furniture

In January 2005, the Bush administration’s Commerce Department slapped new taxes on furniture made in China, accusing Chinese manufacturers of “dumping” products (i.e., selling them too cheaply) on the American market. In response, Chinese furniture firms started setting up plants in Vietnam and Indonesia:

The result: Imports now account for about 70 percent of the U.S. market for beds and similar items, up from 58 percent before Washington intervened to try and protect domestic manufacturers from Chinese “dumping,” or the export of goods at unfairly low prices. […] The trade concerns have led to growing calls for tougher action from Washington to stem the tide and protect U.S. jobs. But do tariffs work? In the case of bedroom furniture, they’ve clearly helped slow China’s export machine. In 2004, before tariffs went into force, China exported $1.2 billion worth of beds and such to the United States. The figure last year was just $691 million.

Over the same period, however, imports of the same goods from Vietnam — where wages and other costs are even lower than in China — have surged, rising from $151 million to $931 million. The loss of jobs in America, meanwhile, only accelerated. The number of Americans now employed making bedroom furniture is less than half what it was when the tariffs began.

Part of the moral of the story here, again, is that if you want to subsidize something the best way to do it is with a direct subsidy. I don’t personally think that paying a subsidy to American-made furniture makes a ton of sense as a policy, but if we did it then it would definitely “work” and increase the quantity of domestically produced furniture. Trying to do things through the dumping/tariff route seems to mainly operated as a subsidy to Vietnamese producers, which isn’t what anyone wanted.

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