Top Ikea retailer says tariffs could drive prices higher

Ikea CEO Warns of Tariff Risks as Businesses Prepare for Higher US Tariffs

FOR budget furniture retailer Ikea, the fewer trade tariffs there are, the better, CEO of Ingka Group, the biggest global Ikea franchisee, told Reuters on Monday (Jan 20) as businesses braced for higher possible US tariffs under President Donald Trump.

Tariffs: A Risk for International Companies

“We, and I think probably all international companies thrive from harmonised tariffs, if you like, and actually, the fewer the better, because at the end of the day there is a risk in any country with tariffs that you need to, as a company, pass it on to the customers,” Jesper Brodin said on the sidelines of the World Economic Forum annual meeting in Davos, Switzerland.

Inflation and Consumer Demand

Inflation and high interest rates have had a “damaging” impact on consumers over the past few years, Brodin said, adding that he saw demand improving.

“We are quite optimistic about the outlook and we already see a shift where people are returning to, I would say, a normal situation when it comes to consumption,” he said.

“Now we see people returning to bigger investments like wardrobes, kitchens, and so on,” Brodin added.

Ingka Group’s Performance

Ingka Group, which runs Ikea stores in 31 countries and accounts for 90 per cent of global Ikea sales, reported a drop in annual net profit and sales last year after cutting prices to lure inflation-weary shoppers back to its big blue stores.

Climate Change: A Real Concern

Despite weak consumer demand, Brodin said his only real worry was climate change. Pointing to the severe economic impacts of extreme weather events like the Los Angeles fires, he said leaders of Europe, the US, and China must find an aligned approach to combating climate change.

“There is still a myth out there that adapting to mitigate climate change will be an economic loss, in Ikea we have found that is absolutely the opposite,” said Brodin.

“We are here to meet other peers and businesses, government leaders in order to speed up the change because the world is not acting fast enough on this.”

Conclusion

Ikea’s CEO has expressed concerns about the potential impact of higher US tariffs on the company’s business, citing the need for harmonized tariffs and the risk of passing costs on to customers. Despite weak consumer demand, Brodin is optimistic about the outlook and sees a shift towards bigger investments. However, his biggest worry is climate change, which he believes requires a coordinated approach from governments and businesses.

FAQs

Q: What is Ikea’s stance on tariffs?

A: Ikea’s CEO, Jesper Brodin, believes that fewer tariffs are better, as they pose a risk to international companies that may need to pass costs on to customers.

Q: How has Ikea been affected by inflation and high interest rates?

A: Ikea has reported a drop in annual net profit and sales last year after cutting prices to lure inflation-weary shoppers back to its stores.

Q: What is Ikea’s biggest concern?

A: Climate change is Ikea’s biggest concern, with CEO Jesper Brodin calling for a coordinated approach from governments and businesses to address the issue.