The Election Effect

What impact has the presidential election campaign had on the home textiles industry in 2020, and what impact will the outcome have next year?

By Kim D. Shaver

EDITOR’S NOTE: The convergence of a global pandemic, economic downturn, racial justice protests and a presidential election year has reverberated throughout the business community in 2020. In this analytical overview, Showtime Magazine is republishing excerpts from an article on the election impact by Tara Donaldson for “Rivet Magazine,” a leading trade publication in the denim industry. In addition, we interviewed several leaders in the home textiles industry for their take on the “election impact” in 2020 and beyond.

RIVET MAGAZINE EXCERPTS

IMPACT ON BUSINESS INVESTMENTS

“One of the things that an election year always does is create more uncertainty, especially if it’s a close election and you don’t know what policies are going to continue,” said Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA). Considering that uncertainty tends to have a cooling effect on spending, many companies have been more cautious about capital investments and new initiatives in 2020.

(This “holding pattern” has been amplified by the pandemic-related economic shutdown, which sparked significant cost-cutting measures for many industries.)

IMPACT ON TRADE

Throughout his presidency, Donald Trump has had a bone to pick with China over its unfair trade practices—particularly those surrounding intellectual property and forced technology transfer—which last year resulted in an ongoing volley of tariffs between the two leading nations. In December, the U.S. and China agreed on a phase one trade deal, which, signed in January, dialed back certain tariffs, but left a sizable burden on the (home textiles) and (furniture) sectors, with 25 percent tariffs remaining on items like thread, yarn, textiles and (component parts, as well as furniture finished goods.)

The (trade war) has fueled an ongoing “undercurrent of nervousness and anxiety,” according to Julia K. Hughes, president of the United States Fashion Industry Association (USFIA)—and the sentiment may not let up anytime soon.

“From the perspective of today, it seems to me that if we have another four years of the Trump administration, we’re going to see even more trade wars, trade disputes, and even more attacks on the multilateral global trade system,” Hughes said.

What remains to be seen is whether Trump determines he’s gotten the response he wanted, or if there are more demands to be made on China. (Depending on the answer) there could be threats to (the consummation of) a full, phase two U.S.-China trade deal. “That may suggest that phase two could be further off and we could see the tariff situation grow worse,” AAFA’s Lamar said. “Regardless of what happens in the election, the U.S.-China relationship will continue to be an area of prime focus for whoever is taking the oath of office on Jan. 20, 2021.”

IMPACT ON SUPPLY CHAINS

Traditionally, when a Democratic candidate wins the presidency, the importance of global supply chain management gets elevated, according to Burak Kazaz, the Steven R. Becker professor of supply chain management at Syracuse University.

If the Republican wins the White House in November, Kazaz said, “Expect more of the same,” adding that he’s “skeptical about the future success of current policies.” If the vote swings Democrat, we could expect a higher degree of global agreements, he said, adding, “Sustainability and environmentally-conscious supply chains are the first to come to mind. Moreover, I anticipate a higher emphasis on supply chain finance because of the movement in capital in addition to the flow of goods.”

WHAT HOME TEXTILE INDUSTRY LEADERS ARE SAYING

Kelly DiFoggio, Director of Sales and Merchandising for Stein Fabrics and President of International Textile Alliance:

Kelly DiFoggio, Director of Sales and Merchandising for Stein Fabrics and President of International Textile Alliance

The presidential election season has been one of many disruptions that leaders at Stein Fabrics have been dealing with over the last two years, says Kelly DiFoggio, director of sales and merchandising. “Last year, it was the trade war (with Chinese imports), and this year, we have had a global pandemic (and economic shutdown), which have overshadowed the presidential election,” she says. “These have been unprecedented disruptions, one right after the other, and it has been difficult to maneuver everything at once.”

While the initial onset of the pandemic and economic shutdown brought business to a halt in the Spring, DiFoggio says that “The (furniture industry) has enjoyed a high rate of shipments, orders and backlogs during the summer, which is usually a slow time, and strong demand for (home furnishings) has continued. Because the pandemic has forced people to stay home more and not travel or go to events, there has been a lot more focus on the home and consumer spending on home interiors. The challenge for our industry right now is getting products out the door fast enough, as well as getting enough components such as foam and lumber,” she says. A high demand environment for home goods has also caused a surge in freight rates and a shortage of container space. “Everyone is trying to do more with less: less staff and less resources,” she said.

The myriad of disruptions, one after the other, presents a feeling of, ‘What is coming next?’ says DiFoggio. “Regardless of the outcome of the election, I believe that those manufacturers and suppliers who can stay nimble, react quickly and stay abreast of global developments will be the ones who come out on top.”

Blake Millinor, Chief Sales and Marketing Officer, Valdese Weavers:

Blake Millinor, Chief Sales and Marketing Officer, Valdese Weavers

Global trade and supply chains will be one of the areas most impacted by the outcome of the presidential election, believes Blake Millinor, chief sales and marketing officer at Valdese Weavers. “Whichever way the election goes, the administration’s plans on global trade will be critical. We’ve had the challenge of the tariffs for the last 18 months or so, and there could be a reassessment as to whether to continue to ramp up or pull back on tariffs,” he says. To date, the tariffs have “certainly caused customers to take a second look at (Valdese) since we are a domestic producer, and that’s helped boost sales since we have been able to respond immediately to the (high demand) for (home furniture and textiles.)” Noting that “most of our customers have now diversified their supply chains,” he says that, “While they will make some adjustments depending on the election outcome, there will be no wholesale changes. The diversified supply chains are here to stay.”

With historically high demand in the housing and home furnishings industries showing no signs of slowing despite an overall economic downturn, “The question on everyone’s mind as the election and a new year looms is, `How much of the increase in consumer spending on (home-related goods) is the COVID financial relief and stimulus, how much of it is pent-up demand and how much of it is new consumer spending habits?’ We are all asking ourselves how long it will last, but that’s a great dilemma to have,” Millinor said.

Mendy Kearns, co-owner, Hamilton Fabrics and Treasurer of ITA:

Mendy Kearns, co-owner, Hamilton Fabrics and Treasurer of ITA

The unexpected housing and home furnishings boom that followed “safer at home” orders throughout the country in the wake of COVID-19 means “We are going into an upcoming election on a sales upswing,” said Mendy Kearns, coowner of upholstery fabric converter Hamilton Fabrics. Business has been strong for the company since midJune, she says.

Because Hamilton Fabrics purchases goods from an assortment of countries including India, Belgium, Italy, Turkey and Spain, “We have not been impacted greatly by the trade war and shifting supply chains,” she says, adding that “If tariffs were extended to Europe in (the next administration), that could impact us.”

When asked what issue in the presidential campaign could impact business most in the future, Kearns cited taxes. “Any change in tax rates to the consumer or to corporate tax rates could negatively impact consumer spending,” she says. Bob Patton, Furniture Division Sales Manager, P. Kaufmann

Bob Patton, Furniture Division Sales Manager, P. Kaufmann:

Bob Patton, Furniture Division Sales Manager, P. Kaufmann

The pandemic has been such a seminal factor in business this year that, “We have almost ignored the presidential election campaign; it has been overshadowed by COVID-19,” said Bob Patton, furniture division sales manager for P. Kaufmann. “When the pandemic first hit, we thought business would really go south, but now it is all we can do to keep up with demand.” While the company’s New York headquarters have been temporarily closed, “We have a warehouse outside of Charlotte that has saved us. We have been able to ship in a timely manner.”

“Lots of log jams in the supply chain and product deliveries” have been the biggest challenges of the last several months, he says. Turning to the presidential election, Patton noted, “There are pluses and minuses to whoever wins. The furniture fabrics world will still be running to catch up with demand, whoever wins,” he believes.

Kathryn Richardson, Vice President of Sales for Libeco and Vice President of ITA:

Kathryn Richardson, Vice President of Sales for Libeco and Vice President of ITA

A presidential election year ushers in “the volatility of the unknown,” says Richardson. “There is a reluctance of companies to make major decisions or investments pending a political outcome. Once that is known, I expect people to pull the trigger on new programs and investments.”

Richardson agrees with many of her peers that both the tariffs and the COVID-19 pandemic have overshadowed the presidential election year. “Because our company is Belgian-based, we have had less volatility in our shipping. The stability in our supply chain has been beneficial as we’ve sought to respond to surging demand, and our ability to respond with faster delivery times has helped us increase shipments and sales,” she says. She speculates that “If tariffs are rolled back by the next administration, that would produce more open to buy for our customers… And, if Trump is re-elected, we could see Europe as the ‘next frontier’ for tariffs, because the administration has already signaled they are considering that.”

Overall, Richardson expects the end of election season to be a welcome milestone. “It is the unknown that is more of a fear factor. Once there’s an understanding of what the landscape will be, businesses will move forward with more confidence.”