Analysis of IKEA China's Supply Chain Localization and Tariff Response Capabilities

Based on collected information, this paper systematically analyzes IKEA China’s supply chain localization and its capability to address tariff challenges.

IKEA has achieved a high level of supply chain localization in the Chinese market. According to public information, approximately 80% of products sold by IKEA in the Asian market come from regional production bases [1][2]. This ratio is much higher than its performance in the U.S. market—currently, only 15% of IKEA products are manufactured in the U.S., down from 19% in 2014 [3][4].

IKEA began its procurement business in China in the 1960s, and opened its first store in Shanghai in 1998. Since then, IKEA has gradually established a complete value chain system in China, covering the entire layout of product development, procurement, production, logistics and distribution, retail stores, and digital innovation [5]. Currently, IKEA covers over 1 billion consumers through 41 offline customer touchpoints, three proprietary digital channels, and two e-commerce platform flagship stores in China [6].

IKEA’s localization strategy in China is reflected in multiple levels:

• Supplier Localization
  : Continuously increase the proportion of Chinese local suppliers; as of the 2025-2026 fiscal year, the proportion of local suppliers has reached 80%
• Product Development Localization
  : Develop products based on insights into Chinese consumers’ home life, such as the Chinese Lunar New Year series, esports series, and promote products developed in China to global markets
• Pricing Localization
  : Invested RMB 160 million in the 2026 fiscal year to launch over 150 low-priced products, with a cumulative investment of RMB 673 million in price adjustments over the past two fiscal years [7]

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The U.S. government has implemented a high-tariff policy on imported furniture products since 2025:

• Imposes a 25% tariff on products such as upholstered furniture, kitchen cabinets, and bathroom vanities [8][9]
• The original plan to raise the tariff rate on cabinets and bathroom vanities to 50% and upholstered furniture to 30% starting from January 1, 2026 has been postponed to January 1, 2027 [10]
• The comprehensive tariff on Chinese goods even reaches 125% [11]

As one of the world’s largest home furnishing retailers, IKEA faces significant cost pressure in the U.S. market:

• Only 15% of products sold in IKEA’s U.S. stores are locally manufactured, much lower than the 70% in the European market [12]
• Its main procurement countries include China, Germany, Italy, Lithuania, and Poland, with China being the largest source of procurement [13]
• Tariffs have directly increased the costs of core products imported from China, such as bookcases, mattresses, and sofas

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According to industry research data, in the cost structure of furniture cross-border e-commerce [14]:

• Procurement Cost
  : Accounts for approximately 58.9% of total costs
• Ocean Freight and Tariff Cost
  : Accounts for approximately 14% of total costs
• Last-Mile Delivery Cost
  : Accounts for approximately 27.2% of total costs

This means that tariff costs account for approximately 14% of total costs, and a 25% tariff will increase this part of the cost by approximately 3.5 percentage points.

IKEA China’s 80% localized supply chain can provide the following cost advantages:

Cost Item	Localization Advantage	Tariff Offset Capability
Procurement Cost	China’s furniture industry clusters are well-developed, resulting in relatively low procurement costs	Can partially offset
Transportation Cost	No cross-border transportation fees	Fully offset
Tariff Cost	No need to pay import tariffs	Fully offset
Logistics Timeliness	Localized production shortens delivery cycles	Indirect advantage

1. Obvious Local Procurement Advantages
   : 80% of local supply in China enables IKEA to almost completely avoid import tariff risks in the Chinese market
2. Cost Pass-Through Capability
   : Strong bargaining power with upstream and downstream parties, which can pass part of the cost increase to the downstream [15]
3. Global Supply Chain Adjustment
   : IKEA is promoting the “local procurement” strategy, increasing the proportion of local procurement in the U.S., including the target of producing most mattresses locally in the U.S. [16]

1. U.S. Market’s Dependence on Imports
   : Only 15% of local production in the U.S. market still faces 25% tariff pressure
2. High Cost of Localized Production
   : The cost of furniture production in the U.S. is higher than in China, and after tariff offset, retail prices may still be pushed up [17]
3. Price Competition Pressure
   : To maintain market share, IKEA has been forced to increase discount efforts, squeezing profit margins
4. Continuous Decline in Sales
   : Affected by tariffs and inflation, IKEA’s sales in the U.S. market have declined for two consecutive years [18]

: The cost advantage of IKEA China’s 80% supply chain localization .

• Chinese Market
  : The localized supply chain enables IKEA to almost completely avoid tariff risks in the Chinese market and maintain price competitiveness
• U.S. Market
  : The 15% localization ratio in the U.S. market is insufficient to fully cope with the 25% tariff pressure, requiring responses such as price increases or profit compression
• Long-Term Impact
  : Tariffs are forcing IKEA to accelerate regionalization adjustment of its supply chain. Although costs increase in the short term, it will enhance supply chain resilience and response speed in the long run

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1. Store Network Optimization
   : Closed 7 inefficient stores and shifted to a smaller, more flexible layout; plans to open more than 10 small stores in Beijing and Shenzhen in the next two years [19]
2. Omnichannel Expansion
   : Officially launched on JD.com in 2025, and piloted instant retail services in 7 cities
3. Supply Chain Reconstruction
   : Increased local procurement in American markets such as the U.S., Canada, and Mexico
4. Brand Positioning Upgrade
   : Launched a new localized brand positioning “Home Gives Life More” to deepen emotional connection with Chinese consumers [20]

According to Fortune magazine analysis, despite the U.S. tariff increase to around 50% in 2025, China’s export resilience remains strong—its global merchandise export share has stabilized at around 14%, mainly due to [21]:

• Expanding trading partners, with exports to the U.S. accounting for only 2%-3% of China’s GDP
• More than half of commodity exports flow to the Global South economies
• Upgraded export structure, with knowledge-intensive products such as electronic products and automobiles accounting for a higher proportion

For the furniture industry, high tariff pressure will accelerate the following trends:

• Regional reconstruction of supply chains
• Capacity transfer to third-party regions such as Southeast Asia and Mexico
• Increase in localized production ratio
• Moderate increase in product prices

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1. Significant Localization Advantages
   : IKEA China’s 80% supply chain localization ratio provides it with strong cost advantages and tariff immunity
2. U.S. Market Under Pressure
   : The 15% localization ratio in the U.S. market cannot fully offset the impact of the 25% tariff, requiring responses such as price increases or profit compression
3. Accelerated Strategic Transformation
   : Tariff pressure is driving IKEA to accelerate global supply chain reconstruction, transforming from “globalization” to “regionalization”
4. Enhanced Long-Term Resilience
   : Although facing cost pressure in the short term, supply chain regionalization will enhance IKEA’s risk resistance and market response speed

Stakeholder	Key Recommendations
IKEA Management	Continue to deepen the Chinese localized supply chain, while accelerating the layout of local procurement in markets such as the U.S. and Mexico
Chinese Suppliers	Seize the opportunity of IKEA’s supply chain reconstruction, improve product quality and ESG standards, and strive to enter the global supply chain system
Investors	Pay attention to the short-term impact of IKEA’s supply chain transformation costs on U.S. market performance, and be optimistic about its long-term resilience improvement
Consumers	Tariff transmission may lead to a moderate increase in furniture prices; it is recommended to make purchases during the price adjustment window

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[1] Analysis of IKEA’s Supply Chain Localization

[2] IKEA Supply Chain Map

[3] Reuters - IKEA to ramp up US production as tariffs bite

[4] Yahoo Finance - IKEA to increase US sourcing as tariffs raise import costs

[5] IKEA China Official Website - Building the Future with Resilience

[6] IKEA China Supply Chain Adjustment Statement

[7] Caijing Magazine - IKEA Closes 7 “Large Stores” and Shifts to “Small Stores”

[8] Wood & Panel - IKEA is Adapting to New Tariffs

[9] Xinhua News Agency - Prices Continue to Rise, U.S. Suspends Further Tariff Hikes on Upholstered Furniture, Etc.

[10] South American Chinese Daily - Prices Continue to Rise, U.S. Suspends Further Tariff Hikes on Upholstered Furniture, Etc.

[11] Mucai Zhijia - 125% Tariff Hits: China’s Furniture Industry Faces New Challenges

[12] Hong Kong Epoch Times - IKEA Expands U.S. Local Procurement to Respond to Trump’s Tariffs

[13] Reuters - IKEA US sourcing strategy

[14] Southwest Securities - Efficient Supply Chain Creates Cost-Effectiveness, “Online IKEA” is Well-Positioned for Overseas Expansion

[15] Cinda Securities - Online IKEA: Similarities and Differences

[16] LinkedIn - Commerce Report: IKEA finally raising prices

[17] Zhihu Column - Trump Postpones Furniture Tariff Hike

[18] Wood & Panel - IKEA Tariff Impact Analysis

[19] Southern Industrial View - IKEA Sudden Store Closure Wave

[20] IKEA China - New Brand Positioning “Home Gives Life More”

[21] Xinhua Daily News Network - U.S. Media: China Will Remain a “Strategic High Ground” for Global Enterprises in 2026