Ikea says Trump's tariffs could push up prices

An Ikea furniture store in Round Rock, Texas, is pictured in February. (Brandon Bell / Getty Images / File via CNN Newsource)

London — The chief executive of the company behind Ikea furniture stores says tariffs make it more difficult to keep its prices low, joining a growing chorus of business leaders in warning of a potential hit to people’s wallets from Donald Trump’s planned import levies.

“In general, we don’t believe tariffs will support international companies and international trade. At the end of the day, that risks ending up on the bills of customers,” Jesper Brodin, Ingka Group CEO, told CNN Wednesday when asked about Trump’s tariffs. He was speaking ahead of the opening of Ikea’s pop-up store on London’s Oxford Street Thursday.

“Tariffs make it more difficult for us to maintain the low prices and be affordable for many people, which in the end is our goal,” he added. “We have never experienced a period of benefit when we had high tariffs,” he said, referring both to Ikea and the global economy. “But it’s beyond our control. We will need to understand and adapt.”

On Monday, President-elect Trump promised massive hikes in tariffs on goods coming from Mexico, Canada and China. In response, officials from those countries warned that the tariffs would harm the economies of all involved, including the United States.

“One tariff will be followed by another in response and so on until we put common enterprises at risk,” Mexico’s president Claudia Sheinbaum said Tuesday during a regular press conference.

Business lobby groups for the U.S. retail and consumer goods industries have also sounded the alarm. Tom Madrecki, vice-president of campaigns and special projects at the Consumer Brands Association, told CNN tariffs were a “clear and present danger” to its members. The group represents Coca-Cola, General Mills, Molson Coors and dozens of other packaged goods companies.

The bulk of Ikea’s goods — some 70 per cent — are produced in Europe, with the remaining 30 per cent made in Asia, mostly China.

On Monday, Trump said he would impose an additional 10 per cent tariff on goods from China until the country prevents the flow of illegal drugs into the U.S..

Ikea’s Brodin did not directly answer a question about whether Ingka Group, which runs most Ikea stores, plans to relocate any of its production in light of Trump’s tariffs but emphasized that it has longstanding relationships with suppliers of more than 10 years on average.

“(We) stick to long-term relationships, for better or worse,” he said.

Last year, Ikea cut prices on roughly 2,000 products — at a cost of more than €2 billion (US$2.1 billion) — to give inflation-weary consumers a break. As a result, it posted a fall in annual revenue in value terms, even though it sold a higher volume of items.

Oxford Street pop-up

The launch of Ikea’s pop-up shop on London’s Oxford Street Thursday will come ahead of the opening of a permanent store on the iconic retail strip in spring next year.

Hus of Frakta, as the pop-up is called, is inspired by Ikea’s giant blue carrier bags, used for everything from shopping to carrying laundry. Visitors will be allowed to personalize their own Frakta bag and shop from a collection of about 100 Ikea products.

When the fully fledged store opens next year, three floors will provide customers with “more or less the full Ikea experience,” including its famous meatballs, according to Brodin.

Ikea bought the building that used to house a Topshop store for £378 million (US$476.6 million) two years ago and has undertaken a massive renovation of the seven-story structure, which is more than 100 years old.

The city-center store will target customers who aren’t able or willing to travel to Ikea’s larger outlets in Wembley and Croydon, on the outskirts of London.