"Tariff impacts remain a fluid situation, making a definitive judgment on the impact hard,” reports Truist.

“Regardless, the flooring industry has one of the higher concentrations of imported goods. The sweeping nature of the announcement has changed our view of the impact versus just duties on China and Mexico. LVT is the most imported product and selling price inflation could erode its value and the deflation it has caused. These changes could be a long-term positive for domestic producers like Mohawk. Import heavy retailer Floor & Decor will most likely shift to more domestic but the name is not at a competitive disadvantage to large peers. Short-term the tariffs are mostly negative.

“Evaluating the tariffs announced on April 2nd is going to be a long-term process, and we believe making a definitive statement is very difficult. Foreign country reactions, shipping rates and currencies are just of a few of the items that could change the impact. Not to mention the changes on consumer behavior with higher prices and/or changing interest rates. Finally, importers have built inventory ahead of this change, so any pricing moves may take several months to realize. Below we have a look at the impact the situation on the flooring market as it stands now. We suspect the facts and our views may change.

“Flooring Market Sees Imports in Most Areas…… The lead up to the implementation of tariffs has had investors looking to see what areas of Building Product are most exposed. Appliances are often mentioned as importing many goods, but we also believe that flooring is one of the leaders. In 2023, roughly 55% of flooring units were imported, with imported goods seen to a certain extent in all areas. Note the second largest contributor, in our view, is area rugs which are somewhat of a different industry than installed flooring. The number would be lower excluding this.

“….. But LVT and Ceramic Have the Highest Penetration. While seen in all flooring, LVT and ceramic have the highest penetrations at roughly 64% of ceramic tile volume and 81% of LVT volume. The reasons for the high imports is different for both, in our view. LVT comes out of Asia and has been difficult to replicate on a domestic production basis. Ceramic tile is produced in virtually every country in the world (it is worldwide the most used flooring material) and thus multiple avenues are available.

“Most LVT Comes From China & Vietnam Which Will See Heavy Tariffs. These two countries have long dominated the production of LVT, with Vietnam gaining substantial market share over China as production has shifted. Coupled with South Korea, substantial tariffs will be placed on almost 90% of all imported product currently. We believe shifting sourcing will take some time, as few other countries have the substantial infrastructure needed.”
  
Source: floordaily.net