January 15, 2025
Lighting Industry Braces for New Trump Tariffs
Uncertainty grows as potential new tariffs on China, Mexico, and Canada loom on the horizon
The lighting industry is bracing for potential cost increases as President-elect Donald Trump prepares to take office next week. Trump has pledged to introduce new tariffs of up to 25% on goods from Mexico and Canada, along with an additional 10% on Chinese imports. These proposals follow the tariffs imposed in March 2018, during the first Trump administration, which significantly increased supply chain costs for lighting manufacturers and distributors.
In a recent social media post, Trump indicated his intention to impose the tariffs on his first day in office, citing a “border crisis of fentanyl and illegal immigrants” as a partial rationale for potentially invoking emergency powers to expedite the measures. While an emergency declaration could fast-track the tariffs, it could face legal challenges. If the administration follows standard procedures, implementation could take several months.
The uncertainty surrounding these potential tariffs has left many lighting industry stakeholders in a state of limbo. Distributors, contractors, manufacturers and lighting agents are grappling with “what if” scenarios raised by customers, who fear rising costs could impact their budgets. Project quotations, often valid for 30 days, may need to account for the possibility of tariff-driven price increases. Distributors are concerned about how tariffs might affect the pricing of “shelf goods.” Meanwhile, manufacturers are also in a holding pattern, unsure how to adjust operations or communicate potential price changes until the tariff situation becomes clearer.
Lighting Industry Exposure to Asia and Mexico
The lighting industry remains heavily reliant on Chinese components, including LED chips, drivers, and other critical electronic elements. Many low-cost LED components, such as 6-cent LED chips or $6 drivers, originate from China. Finished goods like $10 downlights and $20 flat panels also often rely on Chinese manufacturing.
Over recent years, many manufacturers were able to mitigate the impact of tariffs by assembling Chinese components into finished goods in Mexico. Acuity Brands, North America’s largest lighting company, derived 53% of its 2024 revenue from products manufactured in its seven Mexican factories. An additional 17% of its revenue comes from goods manufactured in Asia, primarily believed to be in China, while 24% of its products are made in the U.S.A.
Acuity Brands FY2024:
Finished goods manufactured & purchased
Region | Manufactured (%) | Purchased (%) | Total (%) |
---|---|---|---|
United States | 15% | 9% | 24% |
Mexico | 53% | — | 53% |
Asia | — | 17% | 17% |
Others | 6% | — | 6% |
TOTAL | 74% | 26% | 100% |
Signify, a major player with brands like Lightolier and Gardco, has significant exposure to Mexico, operating plants in Juárez, Mexicali, Camargo, and Tijuana. Its subsidiary, Cooper Lighting Solutions, also utilizes the Mexican maquiladoras to support its production needs. Many of the products assembled in these factories consist of a mix of shelf goods with fixed SKUs, as well as made-to-order configurations tailored for specific project requirements.
Similarly, Current, a $900 million lighting company headquartered in South Carolina, runs a large factory in Acuña, Mexico, just across the border from Del Rio, Texas. However, Current emphasizes its domestic footprint, with three of its five North American factories located in the United States.
Domestic Companies Hunker Down
In response to the growing uncertainty, some companies are touting their domestic production to reduce that tariff exposure. New Jersey-based Coronet, an architectural lighting brand, has emphasized its reliance on U.S.-based suppliers. “Our strategy has always been, and continues to be, one that favors working with component vendors with U.S.-based facilities,” the company said.
Conversely, value-driven U.S. lighting brands that rely on private-label general lighting products manufactured in China may face significant hurdles. These companies often compete on price for distributor shelf space, sometimes operating on thin margins. The proposed tariffs could erode some of their cost advantage, making it difficult to maintain uber-competitive pricing. Such brands, which often function as private-label master distributors of Chinese goods, may find their business model under pressure if the cost of importing goods rises.
A rising tide of increased costs on the most economical lighting products could impact nearly all brands unless they source from low-cost operations in Vietnam, India, Taiwan, or other regions that are less vulnerable to new tariffs.
Canada – Home to Many Architectural Lighting Brands
Canadian lighting manufacturers are also facing scrutiny as proposed tariffs may extend beyond the steel and aluminum products targeted during Trump’s first presidency.
LMPG, which owns Canadian brands such as Lumenpulse, Lumca and Fluxwerx, has invested heavily in more than 200,000 square feet of “Centers of Manufacturing Excellence” in Illinois and California. LMPG Executive Chairman F.X. Souvay emphasized the company’s years-long focus on sourcing U.S.-made components to meet Buy American requirements for airports, roadways, prisons, bridges and other federally funded projects. This strategy has already positioned LMPG to produce products for multiple LMPG brands in its U.S. factories. “The lighting industry does better when we are closer to our market,” Souvay said.
Canadian brands such as Lumenwerx, Axis Lighting, Liteline and Ledalite (a Signify brand) could be affected if tariffs on Canadian imports are implemented. These companies are accustomed to managing USD to CAD currency conversion shifts, which often cause fluctuations in profit margins, but tariffs could add another layer of complexity to their financial planning and price competitiveness.
LMPG’s Souvay, based in Montreal, also pointed out that the company’s U.S. brands, such as Sternberg Lighting and Vode in the United States, have already adapted to potential tariff scenarios by sourcing LED boards from U.S. suppliers. This strategy not only positions them favorably in federally funded projects but also helps mitigate tariff-related risks.
Industry Response and Contingency Plans
While the tariff threats have left many industry stakeholders in a state of uncertainty, major manufacturers are taking varied approaches to prepare. Acuity Brands issued a statement to Inside Lighting highlighting its operational agility: “We’ve demonstrated that we have dexterity in how we operate, which positions us well to adapt to any changing market conditions.” When asked about tariffs during last week’s quarterly earnings call, CEO Neil Ashe said that since no tariffs have been implemented, there is “nothing to talk about” at present.
Current acknowledged concerns surrounding tariffs but, like other large lighting brands with significant Mexican exposure, has adopted a wait-and-see approach. “When tariffs are communicated, Current will react and communicate next steps to our business partners,” the company stated.
Signify, which has significant exposure to Chinese-made components and finished goods, is currently in a quiet period ahead of its earnings announcement. However, CEO Eric Rondolat addressed the tariff issue in an October 28 statement, just one week before the U.S. election: “Look, at this point in time, we have a plan, we have a Plan A, a Plan B, and a Plan C, depending on where the political decisions are going to go. But we are very well positioned, and probably much better than we were when the tariff increased the first time.”
Uncertainty Ahead
The looming tariffs threaten to disrupt the lighting industry’s global supply chains, from raw materials to finished goods. Companies with robust domestic operations may be better positioned to weather the storm, but those reliant on imports face potential cost increases and market shifts. As the new administration’s trade policies unfold, industry stakeholders will continue to adapt and strategize to navigate the changing landscape ahead.