Goldman Sachs says US furniture manufacturers Restoration Hardware, Williams-Sonoma could get hit in latest round of tariffs

Key Points
  • Restoration Hardware, Williams-Sonoma, Michael Kors and Tapestry have exposure in the latest round of tariffs against China, Goldman Sachs said in a new research note.
  • The Trump administration's latest round of tariffs targets around $200 billion in imported goods from China.
  • Apparel and footwear were spared, while furniture, appliances and other consumer goods were hit.
Coach handbags on display in Macy's, New York City.
Scott Mlyn | CNBC

Restoration Hardware, Williams-Sonoma and other U.S. furniture manufacturers that import sofas, tables and other goods from China could take a hit in the Trump administration's latest round of tariffs released Tuesday, according to Goldman Sachs.

The White House on Tuesday released a list of tariffs on $200 billion in imports that could hit U.S. manufacturers that make a lot of their goods in China. It targets a litany of industries with a 10 percent tariff, including China's seafood, agriculture, commodity and textile markets as well as consumer goods like furniture, handbags and appliances.

Manufacturers are facing reduced profits or passing the higher prices on to consumers, analysts led by Matthew Fassler said in a research note published Wednesday.

China supplies 65 percent of furniture imported into the U.S. and the tariffs cover all furniture imported from China, roughly $28 billion worth, Goldman estimated, adding that analysts originally expected just $11 billion of furniture imports would make the list.

Restoration Hardware, which is based in Corte Madera, California, imports 77 percent of its volume by dollars from Asia — with China accounting for a majority of those imports, Goldman said. The company's profit margins will suffer if it can't raise prices, according to the note.

The list spared apparel and footwear entirely, while Goldman originally anticipated tariffs on $24 billion of imports.

Handbags, however, were not. Goldman said Michael Kors and Tapestry, which sells Coach and Kate Spade bags, may be particularly vulnerable. Michael Kors produces "mainly in China," Goldman said. Tapestry's production is less clear. Goldman said the company has previously disclosed that "manufacturers are located in many countries," including China.

Because the handbag market is consolidated and manufacturers have pricing power, Goldman expects that the cost of tariffs will be passed down to consumers. Over time, purse makers could shift their manufacturing elsewhere because they have some flexibility in their supply chains.

Tools, tires, small appliances, sporting goods and HVAC will see modest impacts as a result of the tariffs, but Goldman does not anticipate any meaningful effects.

"The impact on covered retailers will ultimately depend on their ability to pass through pricing increases or divert sourcing to other markets," Goldman Sachs analysts said in a note on Wednesday.

Goldman's economists believe that companies might be less motivated to disrupt their supply chains to avoid the tariff because it is only 10 percent. The most likely result then is "some combination of passing through and digesting the impact to margins."

The list of proposed tariffs, which are expected to take effect around September, could be revised after public review.