WASHINGTON -- More than 170 of the nation's largest footwear companies have sent a message to President Donald Trump urging him to exempt their products from Chinese tariffs.
The shoe sellers signed a letter to the White House warning of the "catastrophic" effects that Trump's proposed 25% tariffs would have on consumers, companies and the U.S. economy. Trump last week proposed the higher tariffs against shoe imports as part of a broader package of restrictions on $300 billion in Chinese goods, including many consumer items. The U.S. already has imposed tariffs, a type of import tax, on $250 billion in Chinese products, but consumer products had largely been shielded during that round.
Consumers ultimately absorb the tariffs in the form of higher retail prices, the shoe companies said, disputing Trump's statements that China will foot the bill. Monday's letter included signatures from such powerhouses as Nike, Adidas, Foot Locker, Ugg, Crocs, Steve Madden, Skechers and Converse.
"We can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer," the letter said. "It is an unavoidable fact that as prices go up at the border due to transportation costs, labor rate increases, or additional duties, the consumer pays more for the product."
The footwear industry is not alone: Economists and other business groups contend that tariffs are a tax on Americans that comes due on the U.S. companies that import foreign goods. Trump has countered that imposing tariffs gives companies an incentive to move production back to the U.S.
He has also said it is the only way to get Beijing's attention as he seeks leverage in his trade fight -- a battle he maintains the U.S. is winning.
"We're going to be collecting over $100 billion in tariffs," Trump told reporters last week from the South Lawn.
Complicating matters further: The shoe industry is deeply entrenched in China. In their letter, footwear companies warned that they can't "simply move factories to adjust to these changes." After all, footwear is one of the nation's most heavily imported products, with nearly all shoes manufactured outside the U.S. Nearly three-quarters of those imports come from China, the American Apparel & Footwear Association said last year.
Matt Priest, president and chief executive of the Footwear Distributors and Retailers of America, an industry group, said many retailers have already begun to map out costs for spring 2020, and that some of its members are worried the new tariffs will put them out of business. Priest said his organization has not yet heard back from the White House.
"The uncertainty is probably the big killer," Priest said. "In the meantime, we have to plan for the unthinkable."
If the tariffs kick in, then consumers would feel it almost immediately because they're assessed once a good crosses the border, Priest said. That would affect back-to-school inventory, as well as holiday sales later in the year, he said.
One of the reasons footwear is harder to produce elsewhere is because of the manufacturing process, which is more complicated than making, say, a pair of pants, said Neil Saunders, managing director of research firm GlobalData Retail. The intricate process means that companies have already made a hefty investment in Chinese equipment and therefore have budgeted for cheaper labor costs.
"All through the supply chain, an increase in tariffs has quite a negative effect," Saunders said.
The Footwear Distributors & Retailers of America estimates that the proposed tariffs would tack on an additional $7 billion in annual costs for customers. That's on top of the existing $3 billion a year in tariffs paid by the shoe industry, thanks to legislation from 1930 that was intended to protect U.S. manufacturing during the Great Depression.
Last summer, Trump levied tariffs on $34 billion worth of Chinese goods. The White House followed up with a threat to extend the tariffs to all $500 billion worth of imports from China, which put the shoe industry on high alert. Nike, Saucony and Under Armour had previously written to the White House, saying that shoe tariffs would lead to higher costs for consumers and fewer American jobs.
"Any action taken to increase duties on Chinese footwear will have an immediate and long-lasting effect on American individuals and families," the companies wrote that March.
Companies of all kinds have to contend with Trump's trade policies, said Mark Cohen, director of retail studies at Columbia Business School. It can be nearly impossible for retailers to practically prepare for potential new tariffs while also keeping up with, and responding to, Trump's use of the element of surprise in negotiations, Cohen said.
"These footwear manufacturers are going to get killed because they can't readily move production into other countries that don't have production at the levels the Chinese have," Cohen said. "And so what happens? Prices are going to go up. Demand is going to go down. People spend less money when prices rise. No question about it."
Information for this article was contributed by Damian Paletta of The Washington Post.
Business on 05/22/2019