While the footwear, outdoor and sporting goods industries collectively braced for the real possibility of higher tariffs on products imported to the U.S. from China, experts forecasted retaliation from China after the two countries failed to reach a trade accord last week. As many anticipated, earlier today China pronounced it will raise tariffs on an estimated $60 billion worth of U.S. imports on June 1. Higher duty rates will eventually result in higher retail prices for consumers in both countries as any duty hikes are passed on.
But it may take upwards of three months for Pres. Donald Trump’s plan to raise U.S. tariffs on China-made products across the board, Larry Kudlow, Director of the National Economic Council told Fox News yesterday morning.
On May 10, with no secure trade deal in place, the U.S. began raising tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent. And the president is threatening to levy a 25 percent tariff on the remaining $325 billion worth of additional goods imported from China shortly, an action that would impact footwear and apparel imports extensively. But any efforts by apparel companies to shift sourcing to other Southeast Asia hubs, particularly Vietnam and Bangladesh, could expose them to new risks, according to a recent supply chain risk analysis report from Verisk Maplecroft.
The Outdoor Industry Association says the shift to a 25-percent tariff rate from 10 percent will impact backpacks, sports backs, leather ski gloves, camp stoves, camp chairs, bikes and bicycle parts. Meanwhile, the Footwear Distributors and Retailers of America is urging its members to Tweet “No New Shoe Tariffs!” to the president, citing the $2.99 billion in duties the footwear industry paid in 2018 and pointing out the vast sum is equal to 85,428 Tesla Model 3 cars, 855 Grande coffees from Starbucks for every person living in Manhattan or one pair of Ray-Ban Wayfarer sunglasses for all 24.1 million Southern Californians.
“Higher costs for our consumers means we sell less shoes,” pointed out Matt Priest, FDRA’s president and CEO. “This threatens jobs in our industry and could put U.S. footwear companies out of business.”
Jonathan Gold, VP of supply chain and customs policy for the National Retail Federation, predicts the latest tariff posturing by the U.S. and China will result in unusually high levels of retail container imports through the summer as retailers race to stock up on merchandise before any new tariffs take effect. April imports were up 7.7 percent, year-over-year, and May and June container imports are forecast to be up 4.2 and 3.7 percent, respectively.
Acushnet Holdings Corp., parent of the Titleist golf equipment, is actively working on “mitigation actions that would minimize any (additional tariff) impact beyond 2019,” CFO Tom Pacheco told analysts last week.
With all the scrambling across industries going on, experts differ on where the trade battle between the U.S. and China currently stands.
“Where we are is worse than where we were a week ago,” William Reinsch, a trade expert for the Center for Strategic and International Studies told the Washington Post. “The tariffs are clearly going to be around for longer than we thought and at a higher level than we thought.”
In Kudlow’s view, the hardline U.S. trade stance is something that was long overdue, despite expected negative consequences that will result both here and in China. “We’ve had unfair trading practices all these years…In my judgment, the economic consequences are so small, but the possible improvement in trade, exports and open markets to the United States, this is worthwhile doing,” he said.