On Wednesday, a number of high-profile members of the shoe industry converged on Washington, D.C., for the third day of public hearings on President Donald Trump’s additional tariffs on Chinese imports.
Steven Madden Ltd. CEO Ed Rosenfeld, fashion designer Marc Fisher, and Matt Priest, president and CEO of the Footwear Distributors and Retailers of America (FDRA), were among the executives ready and willing to testify before the Office of the United States Trade Representative (USTR) about the proposed 25% levy on $300 billion worth of Chinese goods.
During the seven-day hearings, hundreds of companies are set to address the impact of the fourth tranche of tariffs, which would heavily affect footwear. According to the FDRA, while imported consumer goods are taxed at an average rate of 1.9%, current shoe tariffs already go from 11% to as high as 67.5%. Additional duties are anticipated to have a negative effect on the U.S. economy and can lead to widespread worker layoffs on top of increased prices for American consumers.
“I have had dozens of conversations with footwear executives who have told me point blank that, if this proposal goes through, prices will go up, jobs will be lost and capital investments made here in the United States will come to a screeching halt,” Priest said in his written testimony, which he read during today’s hearing. “The numbers that our members are giving us in terms of increased tariff costs on their companies are staggering, making this one of the largest proposed tax increases in American history.”
As costs grow within the supply chain, many corporations have indicated that they may be left with no choice but to raise prices for consumers. Such tariffs would also affect domestic manufacturers — considering that many materials necessary for production are sourced through China and unavailable in the U.S. — as well as footwear jobs, with a smattering of member companies already making attempts to relocate their supply chains outside of China.
“Footwear is a very capital-intensive industry, with years of planning required to make sourcing decisions, and companies cannot move factories in a short timeframe to adjust to this new tax,” Priest said in his testimony. “And even if final construction of footwear takes place outside of China, a vast majority of the materials and value of a finished shoe will originate in China, elongating our supply chains and driving up costs.”
As a result, even domestic footwear producers in places like Maine, Pennsylvania and Oregon have voiced their opposition to the proposal, which they say harms their ability to manufacture footwear in the U.S. — undermining the Trump administration’s desire to move production back on American soil.
For Marc Fisher Footwear LLC, relocating has long been a tough business, starting with the shift of its Nine West manufacturing team from Brazil to China in 1993. In its testimony, the company addressed the more than 10-year process to move the production of 36 million pairs of shoes, requiring significant capital investment as well as the transfer of hundreds of Brazilian factory employees to establish factories and train workers in the production of women’s footwear.
“Today, the footwear industry will face additional challenges,” read the firm’s brief. “In the late 1990s, the footwear industry involved larger production runs of single styles. It was, therefore, simpler to train factory workers who were new to footwear manufacturing. Now, the footwear industry generally has much smaller production runs, which will make training new factory workers more time-consuming and more difficult.”
In 2007, the FDRA said that almost 90% of shoe imports hailed from China. Today, that number is 70%, taking nearly a dozen years to move the needle of the U.S. import volume amid labor shortages and rising costs in China.
While several large corporations have already begun diversifying their supply chains, the process might not come so easy for small and family-owned businesses, which may lack the experience and infrastructure for a homecoming, let alone an overseas move.
Even with the skill, shifting production from one country to another takes time — as Fisher pointed out — and necessitates substantial investment combined with a dedicated workforce. Building factories often demands years of prior planning and establishing relationships with regional suppliers. Companies may also be required to meet the demands of environmental, labor and both chemical and product safety regulations.
In its testimony, SG Companies highlighted its beginnings as a New Jersey-based domestic manufacturer of slippers, producing and selling shoes for 106 years until it became the last remaining major slipper manufacturer in the U.S.
“We could no longer compete with all the other slipper importers, and we were therefore forced to cease our domestic operations, lay off 500-plus factory employees and proceed to source and import all our product from Asia,” said SG Companies President and CEO Matt Feiner.
Over the past 17 years, the company managed to establish its name in the seasonal footwear space and grow its domestic staff of 50 workers to more than 100 in its home state of New Jersey, as well as in Arkansas and California. However, SG expects that its low cost and low margin seasonal footwear business will be hit by the added tariffs — combined with the financial blow of moving out of China, where it sources all of its shoe materials.
“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,” Feiner added.
Deer Stags LLC president Rick Muskat and J. Renee Group CEO Eric Harrison also took part in today’s panel, urging footwear’s removal from the tariffs list as the Trump administration seeks a resolution to China’s purported unfair trade practices.
“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,” Muskat said in testimony submitted to the USTR. “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.”
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