IKEA to Ramp Up US Production as Tariffs Escalate

IKEA plans to source more products from factories in the United States, the Swedish furniture group's top supply chain executive told Reuters. The announcement comes as President Donald Trump's tariffs drive up the cost of importing bookcases, mattresses and sofas. This marks a significant shift for IKEA after the share of the company's U.S.-made products declined over the past decade. Inter IKEA, the brand franchiser, used to have a factory in Danville, Virginia, but shut it in 2019 and moved production back to Europe.

However, IKEA's decision to produce more products in the U.S. is being made to enable its supply chain network to be more resilient, robust and responsive, not protect itself from costly tariffs — although that's certainly a welcome benefit. The idea is to get production closer to customers so that IKEA can more quickly and easily react to fluctuations in demand levels, both up and down.

Total Retail's Take: While increasing its production capacity in the U.S. will be more expensive for IKEA (even with the added benefit of avoiding tariffs), the retailer will offset some or all of those costs by saving on not having to ship those products across the world. Consider that only 15 percent of IKEA products currently sold in U.S. stores are made in-country; compare that to other regions of the world where the furniture chain operates, including Europe (70 percent of the products IKEA sells are made in the region) and Asia (80 percent).

Furthermore, by bringing more product manufacturing into the U.S., IKEA stabilizes its supply chain, limiting the impact of global supply disruptions that have become more frequent post-COVID. IKEA is hopeful that this nearshoring approach leads to better customer experiences (i.e., less out-of-stocks, faster delivery) and, in turn, increased loyalty.