IKEA U.S. Production Ramp-Up: Tariff-Driven Strategy and Industry Implications

On December 5, 2025, IKEA revealed plans to increase U.S.-manufactured product sales (currently 15% of U.S. sales) by expanding production of items like KALLAX shelves, mattresses, and sofas, driven by escalating tariffs on imported furniture [1]. Key initiatives include ramping up operations at a $70 million North Carolina factory operated by Lithuanian supplier SBA Home (supported by Inter IKEA) and expanding partnerships with U.S. manufacturers like Sauder Woodworking [1].

The U.S. furniture industry faces significant headwinds: President Trump’s September 2025 executive order imposed 25% tariffs on upholstered furniture, kitchen cabinets, and wood imports (set to rise to 30-50% in 2026 [2]). This has contributed to declining sales (1.7% year-over-year in October 2025 [3]), multiple retailer bankruptcies (including 5th Avenue Furniture and American Mattress [3]), and a 23.2% expected decline in Asian imports [4]. IKEA’s decision accelerates a pre-existing trend, as tariffs have already eroded its profits and forced price hikes [5]. The move also aligns with IKEA’s Net Zero Transition Plan, reducing transport-related emissions by producing closer to consumers [6].

1. Tariff-Driven Reshoring Acceleration
   : IKEA’s production shift reverses a decade-long trend of Asian manufacturing offshoring in the furniture industry. With 2026 tariff hikes looming, this trend is likely to spread to other retailers, reshaping global supply chains [0].
2. Resilience vs. Cost Trade-Off
   : While local production reduces tariff and post-COVID shipping costs, U.S. labor and material costs are higher. IKEA’s ability to balance these factors will determine its ability to maintain low-price positioning [0].
3. Competitive Pressure on Peers
   : Retailers like Wayfair and Ashley Furniture, which have raised prices due to tariffs but not announced large-scale U.S. production, face increased competition if IKEA can leverage faster delivery times and tariff avoidance [1][2].

• U.S. Suppliers
  : Domestic furniture manufacturers (e.g., Sauder Woodworking) and raw material providers stand to gain increased orders from IKEA and other retailers following the reshoring trend [1].
• Consumers
  : Expanded U.S.-made product options and faster delivery times may offset potential price hikes from tariffs [0].
• IKEA
  : Enhanced supply chain resilience and alignment with sustainability goals could strengthen brand loyalty [6].

• Production Cost Pressures
  : Higher U.S. labor and material costs may force IKEA to raise prices further, eroding its value proposition [1].
• Competitive Response Uncertainty
  : Competitors could accelerate their own reshoring efforts or implement aggressive pricing, limiting IKEA’s market share gains [0].
• Tariff Policy Volatility
  : Changes in tariff rates or policy could disrupt long-term production plans [2].

IKEA’s U.S. production ramp-up is a tariff-driven strategic response to industry challenges, including declining sales, retailer bankruptcies, and rising import costs. The move reflects a broader reshoring trend in the furniture sector, with implications for U.S. suppliers (growth opportunities), competitors (pressure to adapt supply chains), and consumers (mixed impacts on pricing and product availability). While the strategy aims to enhance resilience and sustainability, it carries risks related to production costs and policy uncertainty.