Until next Tuesday, the Office of the United States Trade Representative is allowing testimony from hundreds of industry leaders who have come out in force against a tax that they say would hurt businesses, families and the overall U.S. economy.
From Vans parent VF Corp. and Steven Madden Ltd. to the Footwear Distributors and Retailers of America, CEOs, retailers and trade organizations have prepared to address the impact of the 25% duties on $300 billion worth of products, which include a wide variety of consumer goods such as footwear, apparel and fashion accessories.
At the end of the month, both Trump and Chinese president Xi Jinping are expected to come together in a possible make-or-break meeting at the G20 Summit in Osaka, Japan — the first face-to-face talks between the world’s two largest economies since last month’s failed negotiations.
Here, footwear and fashion leaders who are speaking during the seven-day hearing sound off on the critical issue and how it will impact their companies in the months ahead.
Ed Rosenfeld, chairman and CEO of Steven Madden Ltd.
“The proposed additional tariff on footwear imports will immediately force us to raise prices on our consumers to cover the cost increases. Knowing we serve a price-conscious shopper, these price increases will depress sales which in tum will force us to close stores and lay off workers. Because as an industry and a company we already pay very high duty costs, we know firsthand the impact these punitive tariffs have on all American footwear consumers.
The manufacturing of footwear requires a lot of capital and infrastructure in order to meet the needs of our consumers worldwide. Years of planning are required to make sourcing decisions, and the establishment of new capacity outside of China and the movement of production to new facilities cannot happen overnight.”
Karen Giberson, president and CEO of the Accessories Council
“[Small-and medium-size businesses] are the companies that I fear for the most. They don’t have resources, they don’t have sourcing departments, they don’t have unlimited budgets or time to travel the world to figure out who else can make their product. A lot of the startup companies are already in a fragile situation. They’re making the basic minimum orders you can make, and it’s really hard to find new and trustworthy resources — and it’s very expensive.
When you’re doing it on your own — you’re designing, you’re marketing and you’re selling — and then you’re hit with an unexpected whammy to your very slim profit margin, it’s things like that you can’t absorb. You question whether you can afford to stay in business.
There’s a desire for people to reduce dependency on China, but from a cost perspective, it’s not easy. In some cases, it’s impossible.”
Marc Schneider, CEO of Kenneth Cole Productions Inc.
“As more people move out of China, the demand in those [other] countries is getting greater, but the supply isn’t greater because they have only X amount of equipment or X amount of lines to make footwear, and the prices are going up in those countries — not because of tariffs, but because of common economics.
After building a supply base for 30 to 40 years, it’s not simply to just quickly make a strategic decision to change your sourcing strategy overnight. It’s going to have a devastating impact on retailers, consumers and the industry. The cost is absorbed by either the companies, the consumer or the retailers. Any one of those three will have to bear that burden. To men, it’s a tax on all three.”
Matt Feiner, president and CEO of SG Companies
“Given the nature of our low-cost, low-margin seasonal footwear business, moving out of China where we source all of our footwear product would be impossible in the short-term due to capacity and pricing constraints. Such incremental duties would have a domino effect that would very likely eliminate all projected profit in 2019, which would in turn cause us to reduce staff and seriously threaten the viability of our 123-year-old company, which would further impact many other small U.S. businesses who have come to depend on us as a vendor.”
Matt Priest, president and CEO of the Footwear Distributors and Retailers of America
“[Women’s fashion] is one of the biggest parts of our industry that’s under threat because they are most predominantly in China. China has provided the opportunity for fashionable women’s shoes to get to U.S. consumers at high quality and affordable prices.
It’s an unavoidable fact that the consumer will be hit. You jack up the prices on some things, and the demand for those products will go down. What happens when prices go up and demand goes down? There’s less to spend on job creation and on capital improvement; I think it will have a lasting impact on the amount of money that’s available to support jobs and to invest in much needed capital investments.
Next year marks the 90th anniversary of our tariffs going into effect [the Smoot-Hawley Tariff Act], and I think we’re the poster child for an industry that has long understood that tariffs do not serve the purposes that they are purported to serve, and they ultimately negatively impact the American consumer and their ability to buy products.”
Monica Gorman, VP of Responsible Leadership and Global Compliance at New Balance Athletics Inc.
“New Balance is proud to continue to manufacture domestic footwear in the United States for more than 75 years, and we remain firmly committed to our five New England factories and the hundreds of American manufacturing associates we employ. We source some components for our domestic manufacturing from China, as well as other countries, due to a limited U.S. supply chain. New Balance supports efforts to achieve fair and balanced trade with China and improve the protection of intellectual property, but we believe that punitive tariffs on components used for domestic footwear manufacturing would be ineffective and cause disproportionate harm to U.S. manufacturing interests.”
Patrick Fox, senior director of customs and trade strategy at VF Corp.
“In our fiscal year 2019, VF’s China revenue increased about 20%, with China representing 6% of our total revenue globally. As this market has grown, we have created a highly capable team and a comprehensive operating platform that will serve VF well as we respond to the demands of this quickly growing market. While VF strongly supports the Administration’s goal to improve the protection of intellectual property rights in China, it is our belief that tariffs on U.S. companies and U.S. consumers are not the way to achieve that goal. New tariffs — and the threat of new tariffs — significantly complicate global sourcing strategies, create uncertainty that business needs to operate efficiently and ultimately result in higher prices for U.S. consumers.”
Rick Helfenbein, president and CEO of the American Apparel and Footwear Association
“In 2018, China accounted for about 42% of all apparel and 69% of all footwear imported into the United States. China has emerged as a top supplier because it has unparalleled supply chains that have been developed over generations. While some countries can provide alternatives for business that is currently in China, all other countries combined are ill-equipped to handle the sheer volume that would be required to transfer — without a significant cost increase to the American consumer and a potential decrease in the integrity of the product — which causes concern especially in regard to product safety issues.
Yesterday’s message from the industry could not have been more clear. Do not tax the American consumer, and do not tax our American manufacturers. As an industry, we already pay a disproportionate amount of tariffs. This will not help anyone and has the potential to be catastrophic for our economy.”
Rick Muskat, president of Deer Stags LLC
“We service a moderate-price-point consumer, and the proposed tariffs would dramatically increase cost and potentially lower demand at a critical time for our company. If we are unable to pass along these increases in cost of goods, our ability to operate will be squeezed to the point where our business may no longer operate at all.
This tariff increase will fall disproportionately on small U.S. footwear companies like ours because small companies do not have the resources needed to diversify supply chains outside of China. Footwear is a very capital-intensive industry with years of planning required to build supply chains. We are concerned that this tariff could single-handedly reverse over half a century struggling through the journey to support our large family and our many loyal employees.”