Footwear companies Nike and Adidas are publicly airing their grievances and having their say about President Trump's pending decision to slap tariffs on footwear made in China. The companies are calling the policy “catastrophic for our consumers, our companies and the American economy as a whole,” according to Bloomberg and a letter released publicly by the shoe industry’s trade association, the Footwear Distributors & Retailers of America, on Monday.
The two giants have been joined by 171 additional footwear companies in asking the President to hold off on raising tariffs further. The letter was also addressed to Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and National Economic Council director Larry Kudlow. The industry estimates that the tariffs, if implemented, would add $7 billion in new costs per year that would need to be passed onto the consumer.
"On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden. Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end."
President Trump has recently threatened tariffs as high as 25% on Chinese goods. The U.S. Trade Representative’s office released a list of products that could see higher import duties, including footwear, last week. Trump is set to talk to Xi Jinping next month to discuss the issue further.
Michael Jeppesen, president of global operations for Wolverine World Wide Inc., which also signed the letter, said of the tariffs:
“We don’t make enough to absorb that. The only way it can is to be passed onto the consumer.”
Duties have always been higher for footwear makers due to longstanding tariffs that already sometimes exceed 30% for those in the industry. Nike makes 26% of its apparel and footwear in China while Sketchers produces about 65% of their products there. In Sketchers' case, not all of the products manufactured in China are imported to the United States. Under Armor gets about 18% of its products from China, down from 46% in 2013, and has goals of getting that number down to 7% by 2023.
The U.S. imported $11.4 billion in footwear from China last year, according to the U.S. Census Bureau.
This isn't the first time the industry has sounded off against proposed tariffs, either. In March of last year, more than 100 brands wrote to Trump to urge him to reconsider tariffs.
“Given the price sensitivity of our products, any additional increases in our costs would strike right at the heart of our ability to keep product competitively priced for our consumers,” the March letter read.
Here’s the full letter released on Monday:
Dear Mr. President:
As leading American footwear companies, brands and retailers, with hundreds of thousands of employees across the U.S., we write to ask that you immediately remove footwear from the most recent Section 301 list published by the United States Trade Representative on May 13, 2019. The proposed additional tariff of 25 percent on footwear would be catastrophic for our consumers, our companies, and the American economy as a whole.
There should be no misunderstanding that U.S. consumers pay for tariffs on products that are imported. As an industry that faces a $3 billion duty bill every year, we can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer. 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.
This significant tax increase, in the form of tariffs, would impact every type of shoe and every single segment of our society. In fact, our industry’s trade association, the Footwear Distributors & Retailers of America (FDRA), ran the numbers and the results are staggering. FDRA estimates your proposed actions will add $7 billion in additional costs for our customers, every single year. This dramatic increase would be on top of the billions Americans already pay as a result of the current tariff burden on footwear imports that was started in 1930.
High footwear tariff rates fall disproportionately on working class individuals and families. While U.S. tariffs on all consumer goods average just 1.9 percent, they average 11.3 percent for footwear and reach rates as high as 67.5 percent. Adding a 25 percent tax increase on top of these tariffs would mean some working American families could pay a nearly 100 percent duty on their shoes. This is unfathomable.
There have been suggestions that industries should quickly shift sourcing to countries other than China in the wake of these additional tariff threats. While our industry has been moving away from China for some time now, footwear is a very capital-intensive industry, with years of planning required to make sourcing decisions, and companies cannot simply move factories to adjust to these changes. Any action taken to increase duties on Chinese footwear will have an immediate and long-lasting effect on American individuals and families. It will also threaten the very economic viability of many companies in our industry.
On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden. Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end.