The smart home industry is bracing for chaos as President Donald Trump's latest tariffs on Chinese imports threaten to disrupt the global supply chain and drive up prices for consumers. The 125 percent levy on Chinese goods and components will hit smart home device makers hard, many of whom are already struggling to stay afloat.

The industry has been facing challenges in recent years, including increased competition from budget-friendly smart home companies based in China and slower-than-expected adoption rates among homeowners. The tariffs will only exacerbate these issues, making it difficult for companies to afford to manufacture their products and for consumers to afford them.

Many smart home device makers source products from China, and even those that have relocated manufacturing to other countries may still use Chinese-made components. The new tariffs on countries like Vietnam, where many companies relocated manufacturing, will compound their problems. The uncertainty surrounding the tariffs is causing confusion and chaos, with companies unsure of how to plan for the future.

Smaller companies, in particular, are feeling the pressure. Gimmy Chu, CEO of Nanoleaf, a smart lighting company based in Canada, likened the situation to "a bunch of crabs in boiling water." He noted that while bigger companies may have the capital to sustain these kinds of changes in the economy, many smart home makers are startups that are struggling to stay afloat.

Nanoleaf is an example of a company that moved much of its manufacturing to Vietnam and the Philippines after Trump's 2018 tariffs. However, with the potential of new tariffs on its products from these countries, Chu says the company would need to look at relocating everything again. But supply chains are difficult to move, and the uncertainty surrounding the tariffs makes it hard to know where to move to.

Moving manufacturing to the US isn't a feasible option for many companies. Even if there were factories that could assemble their products, few, if any, of the components they need are made in the US. The high cost of investing in transferring to the US is made worse by the uncertainty surrounding the tariffs.

The tariffs will likely lead to higher prices for consumers, which could keep new households from entering the smart home market. Industry analyst Jennifer Kent of Parks Associates notes that the perception that smart home devices are not affordable is the number one barrier to purchase for households who neither currently own nor intend to buy smart home products.

After several years of getting cheaper, smart home device prices are set to rise. Average selling prices for popular products like smart garage door openers, door locks, video doorbells, and lights at the end of last year were close to or, in some cases, higher than the same period in 2017, following some significant drops in the intervening years.

The impact of the tariffs will be felt not only in the prices of smart home devices but also in the frequency of sales and discounts. Smart home buyers have become accustomed to seeing regular sales throughout the year, but these may become a thing of the past as companies struggle to absorb the increased costs.

The smart home industry is at a critical juncture, and the tariffs could have far-reaching consequences for manufacturers, consumers, and the industry as a whole. As the situation continues to unfold, one thing is clear: the tariffs will have a significant impact on the smart home market, and it's unclear what the future holds for this rapidly evolving industry.