President Donald Trump and the US government continue to skirmish with China in a trade war that has seen tariffs raised to 25 percent on around $200 billion worth of Chinese goods. This might not sound like it has much to do with sneakers or those who buy them, and President Trump insists China will be footing the bill for increased prices.
However, speaking to Highsnobiety, market analyst Matt Powell says, “The greatest misconception is that China is paying the tariffs. This is a lie. The American consumer will be paying the tariff. Tariffs are taxes on the consumer.”
Powell’s sentiment is echoed by others, including White House economic advisor Larry Kudlow, who told Fox News Sunday, “In fact, both sides will pay.” With a 25 percent tax slapped on Chinese-made consumer goods, US importers will be the ones who pay — and businesses could pass that additional cost on to American consumers.
Finished consumer goods such as sneakers were previously left off the list of products to be hit by increased tariffs as the trade war heated up, but with the bump to 25 percent this month, the Trump White House has decided to tax almost all remaining imports (valued at approximately $300 billion), sneakers included.
The decision has the sneaker industry and experts reeling at the possible impact. Matt Priest, president and CEO of the Footwear Distributors and Retailers of America (FDRA), told Yahoo Finance, “Higher costs for our consumers means we sell less shoes. This threatens jobs in our industry and could put US footwear companies out of business.”
@realDonaldTrump Footwear is already hit with a $3 billion tariff bill EVERY Year. That's enough to buy 855 Starbucks coffees for everyone in Manhattan! 80% of kids shoes are made in China – U.S. families cannot afford even higher tariffs on shoes! Please – NO new shoe tariffs! pic.twitter.com/USg9ckg1xB
— FDRA (@FDRA) May 10, 2019
Priest isn’t alone. President and CEO of the American Apparel & Footwear Association Rick Helfenbein told CNN he is “beyond freaked.” In this video, he compared the new tariffs to tariffs from 1930 that Helfenbein claims resulted in “98 percent of apparel and footwear being imported into the United States.”
Powell believes companies will have to pass at least some of the additional cost on to shoppers. “Brands will try to absorb as much of the increase as they can, but the bulk of the increase will have to be passed on to the consumer,” he says. “The prices of shoes made in China will go up due to the tariffs. Brands that are more dependent on China will be hurt the most.”
Just how much the price of sneakers could change was recently estimated by the FDRA. The figures, first reported by Footwear News, are based on the “landed cost” of the imported shoe. This includes the price of producing and shipping the shoe, which is then multiplied by three — a standard retail markup — to account for costs such as warehousing, marketing, transit, labor, and the profit margin.
A sneaker that costs around $48 at retail, with a landed cost of $14.60 and a tariff of 14.1 percent, would cost $60.93 with the additional 25 percent duty. And those higher prices for goods are expected to bite over time. Last year, the American Apparel & Footwear Association estimated that the additional 25 percent could cost a family of four an extra $500 on their typical annual purchases.
When asked whether the trade war with China will prompt companies to make changes to their supply chain and even bring production back to the US, Powell wasn’t convinced. “Labor costs in the US are far too high to be competitive with Asia,” he says. “Higher tariffs will not result in footwear manufacturing moving to the US.”