IKEA will increase production in the US in the face of tariffs

IKEA plans to source more products from factories in the United States, the Swedish furniture group's top supply chain executive told Reuters, as President Donald Trump's tariffs raise the cost of importing shelving, mattresses and sofas.

This marks a big change for IKEA after the company's share of American-made products declined over the past decade. Inter IKEA, the brand's franchisor, used to have a factory in Danville, Virginia, but closed it in 2019 and moved production to Europe.

IKEA's push to source products closer to where it sells them is aimed at supporting the retailer's expansion in the US, its second-largest market, and in the wider region, where it has stores in Canada, Mexico, Chile and Colombia, with plans to open in Costa Rica and Panama.

“We are designing our supply chain network to be much more resilient, robust and responsive,” said Susanne Waidzunas, global supply manager at Inter IKEA in an interview with Reuters, adding that the company's stores in North and South America rely heavily on furniture shipping, with long lead times.

“The closer we can build, the faster we can react from a supply perspective, both when demand goes up and when it goes down,” Waidzunas said. The plan to produce closer to American consumers predates this year's tariff increases and is part of a global initiative.

But now the timing is beneficial: IKEA prides itself on its low prices, but was forced to increase them on some products in the United States to offset the tariff impact. The retailer's sales have declined for two years in a row as it lowered prices to attract shoppers tired of inflation.

SBA Home, a Lithuanian supplier to IKEA, is expanding its first U.S. factory in Mocksville, North Carolina, a $70 million investment supported in part by Inter IKEA. The factory will make products for IKEA, such as the best-selling KALLAX shelves.

Jurgita Radzevice, CEO of SBA Home, said the manufacturing capacity of the largely automated factory, which is expected to produce 2 million pieces of furniture a year, is steadily increasing.

IKEA depends more on imports in the US than elsewhere. Only 15% of IKEA products sold in US stores are made in the country, down from 19% in 2014. In Europe, 70% of the products IKEA sells are made in the region, while the equivalent figure in Asia is 80%. Its main supplier countries are China, Germany, Italy, Lithuania and Poland.

Producing in the U.S. is more expensive, Waidzunas said, but shipping products around the world is also more expensive and more unpredictable now than before the COVID-19 pandemic. IKEA plans to buy more from existing U.S. suppliers, including Ohio-based Sauder Woodworking, and look for new suppliers, especially for bulky items, aiming, for example, to source most of its mattresses in the United States.