Tariffs Hit Multi-Family Industry

Tariffs Hit Multi-Family Industry

Trump administration’s adoption of tariffs on Chinese imports is anticipated to raise prices through much of the US economy.  Multifamily industry is no exception.  In 2019, property management will experience significantly higher prices for appliances, air conditioning and many MRO items.

The three major manufacturers of appliances for multi-family – General Electric, Whirlpool and Frigidaire – have all announced price increases of about 8% – 12% that will kick in during the 1st quarter of 2019.  These manufacturers (including GE which is now owned by the Chinese firm Haier) build almost all their product in the U.S. but many of the raw materials and components used to build appliances come from China.

Air conditioning manufacturers are also raising equipment prices.  Daikin, the maker of Goodman air conditioning, which has a significant market share of multi-family business in Florida, has announced a 5% increase for 2019.  This is in addition to a 5% mid-year price escalation in 2018.  Carrier and Trane have likewise announced price increases.

These price increases are a direct result of the Trump Administration’s punitive tariffs.  Anti-dumping duties have reduced the supply of foreign-made steel and other raw materials leading to inflated prices for domestic steel.  Moreover, the Trump administration has announced a blanket tariff of 25% on steel imports and 10% on aluminum imports for 2019.  Rising cost of components is also contributing to price increases. While most appliances and air conditioners are assembled in the US, many of their parts – compressors, motors, timers and the like – come from China.  These components are now subject to tariffs of up to 25%.

What does this mean for the multi-family industry? Clearly appliance and air conditioning equipment will cost more. One budget-saving strategy is to focus on maintenance and repair to extend the useful life of appliances and air conditioners.   Simple preventive maintenance like filter changes and coil cleanings can prevent costly air conditioning system failures. Many appliance failures can be fixed with part replacement.  But here too management will experience increases of possibly 25% or more, as most repair components in our industry are sourced from China and consequently are hit with import tariffs.