On 6 July 2018, Trump slapped 25% tariff on USD34 bil China products. In retaliation, China imposed equivalent amount of tariff on US products. Trump instructed his Trade Office to escalate by slapping 10% tariff on another USD200 bil China products. This time, furniture is on the list.
https://ustr.gov/sites/default/files/301/2018-0026%20China%20FRN%207-10-2018_0.pdf
It seemed that the market has not fully grasped the impact of the latest development.
In 2015, the US imported USD12.2 bil of furniture from China. Based on USD : RM exchange rate of 4 : 1, that is equivalent to RM50 billion.
In the event that the tariff goes into effect by end August 2018 (post hearing), American retailers which have been buying from China will have to find alternative suppliers for RM50 bil purchases.
For your information, Poh Huat, Lii Hen, Latitude and Homeritz's revenue last year was RM612 mil, RM716 mil, RM785 mil and RM170 mil respectively. Added together, total revenue is RM2.3 bil. This represents merely 5% of the potential demand to be unleashed by the latest round of trade action. You can imagine the positive impact if the tariff really materialises.
If you ask me which counter is the best play for the above theme, I would say all furniture companies are equally good. Those that are already supplying to US customers will see increase in demand while those that currently don't sell much can tap the opportunity to enter the market in a big way.
Just a word of caution : the tariff is not a sure thing yet. Many things might happen between now and end August. Trade / invest with caution, don't get carried away.
http://tradingandpsychology.blogspot.com/2018/07/icon-us-china-trade-spat-might-lead-to.html
