Tariff Impact in the New Year: 90% of Christmas Trees Come from One Country, and 80% Are Artificial

December 2023, a Workday at Lee Display Company.On a workday in December, Mark Latino and several workers were busy processing rolls of vinyl sheets into the shiny foil strands that hang on Christmas trees. The customized machine they were using is nearly a century old, and along a 35-foot (approximately 10 meters) production line, it continuously produces sparkling foil strands. Latino is the CEO of Lee Display, a company founded in 1902 by his great-grandfather in Fairfield, California. Initially, the company produced handcrafts of velvet and silk flowers for hat decorations. Today, it remains one of the few remaining U.S.-based manufacturers of artificial Christmas trees, producing around 10,000 trees per year.Tariffs Affect Christmas Trees.This year, tariffs have brought artificial Christmas trees into the spotlight, highlighting the United States’ high dependence on imports for plastic Christmas trees. According to the U.S. National Christmas Tree Association, the new tariffs have caused prices for artificial trees to rise by 10% to 15%. As a result, many retailers have reduced their orders and paid higher tariffs on existing inventory. Despite these challenges, the Christmas tree industry generally believes that after decades of manufacturing in Asia, it is not realistic to move large-scale production back to the United States. National Tree Company, which sells more than one million artificial trees annually, sees it as an unlikely option.

CEO Chris Butler points out that artificial trees are labor-intensive products that require additional holiday decorations—many of which are no longer produced in the U.S.Price Sensitivity and Consumer Preferences.Butler mentions that U.S. consumers are extremely price-sensitive when it comes to holiday decorations. “If the price doubles, even a ‘Made in the USA’ label won’t make a difference. Even a 20% increase would lead consumers to look elsewhere.” According to the National Christmas Tree Association, about 80% of U.S. households that plan to set up a Christmas tree this year will choose an artificial tree. This preference has remained consistent for at least the last 15 years. Mike Harman, the founder of Balsam Brands, points out that Americans often set up their Christmas trees as early as Thanksgiving and keep them up for weeks, which causes real trees to dry out. Additionally, some consumers prefer artificial trees due to allergies to mold spores found on live trees. Harman’s company sells hundreds of thousands of Balsam Hill Christmas trees each year.Convenience and Labor Costs.Butler adds that U.S. consumers also value convenience: 80% of artificial trees sold each year come with pre-installed lights. This preference is one reason why production of artificial trees moved out of the U.S. In the early 1990s, production lines were first relocated to Thailand, and about a decade later, they moved to China.

Harman admits that wrapping lights around the branches is both time-consuming and tedious. “Where in the U.S. can we find 15,000 people willing to wrap lights around Christmas trees?” he asks.Chinese laborers are often compared to Olympic athletes. According to Butler, from injection-molding the needles to assembling branches and installing lights, it takes 1 to 2 hours to make one artificial tree. 90% of artificial trees globally are made in China, where workers earn just $1.5 to $2 per hour. Harman praises the efficiency of Chinese workers wrapping the lights on Balsam Hill trees, saying “Watching them work is like watching the Olympics.” He reveals that a Chinese partner factory employs between 15,000 and 20,000 workers, and an Indonesian partner has nearly 10,000. Many of these workers are seasonal employees, as Christmas decoration orders significantly drop from October to February.The Feasibility of U.S. ProductionHarman notes that during Trump’s first term, Balsam Brands, headquartered in Redwood City, California, evaluated the feasibility of producing artificial trees in Ohio. At that time, Trump threatened to impose tariffs on imported Christmas decorations but ultimately delayed their implementation. The company hired consultants and considered automating some processes, but the conclusion was that a tree currently selling for $800 in the U.S. would cost $3,000 to produce domestically.

Harman says they even couldn’t find U.S. manufacturers to produce special gloves for sorting branches. The trees may come home, but the lights remain in China.Local Production Challenges.Lee Display usually employs just three or four people, hiring additional staff only during the holiday season. Half of their business involves custom display units for companies like Macy’s, while the other half is direct-to-consumer sales. Latino favors domestic production because it allows for faster order fulfillment, without the wait for overseas shipping. “This way, I have more control. I believe that everything here—whether it’s mistakes, errors, or careful planning and craftsmanship—comes from my hands.” However, the tariffs still affect Lee Display. James Latino, who handles business development and marketing, says the company has not imported lights or decorations from China this year and is relying on existing stock. However, their inventory of lights is nearly depleted, and they will have to import at higher costs next year.Diversification to Reduce Dependence on China.Some artificial tree companies are working to reduce their dependence on China by diversifying their supply chains. National Tree Company, based in Cranford, New Jersey, is moving part of its production to Cambodia in 2024.

Butler says that if necessary, the company could source all of its products from outside China next year. However, supply chain diversification has not entirely shielded companies from tariff impacts. In April of this year, the Trump administration threatened to impose a 49% tariff on Cambodian products, though the final tariff rate was reduced to 19%. According to the National Christmas Tree Association, tariffs on Chinese-made artificial trees have also fluctuated, and the current average rate is about 20%. Butler says his company reduced imports and raised prices by 10%. Due to consumer concerns about the economy, demand has weakened, and he has had to spend significant amounts on customer discounts. “These are non-essential items. People often say, ‘I can wait another year.'”Impact of Tariffs on Holiday Cheer.Harman states that to offset the impact of tariffs, Balsam Brands has laid off 10% of its staff, canceled business travel, frozen pay increases, and even stopped the weekly office lunches, while raising tree prices by 10%. He notes that sales in the U.S. have dropped 5% to 10%, but sales in Germany, Australia, Canada, and France have grown by more than 10%, indicating that tariffs have indeed suppressed domestic demand in the U.S. “If the amount of decoration defines the level of holiday cheer, this year’s festive atmosphere will certainly be a bit muted.”