Mere weeks after President Donald Trump pushed billions of dollars in new tariffs that stoked fears of a trade war with China, the focus of shoe industry leaders who have convened in Washington, D.C., this week is unsurprisingly their multibillion-dollar duty burden.
One day ahead of the Footwear Distributors & Retailers of America’s annual Footwear Executive Summit, just under a dozen footwear executives — including Steve Madden chairman and CEO Ed Rosenfeld, Chinese Laundry group president Tsering Namgyal, Shoe Carnival president Cliff Sifford and Wolverine World Wide Inc. president of global operations Mike Jeppesen — gathered to sound off on the persistent hot-button topic of trade.
“Retail is not dead, but it is certainly changing very quickly, and we all have to adapt to that and make investments to succeed in this new world,” Rosenfeld said. “One of the challenges in an industry that is so heavily burdened by tariffs is that it impacts companies’ abilities to make investments in new technologies [and] enhance manufacturing techniques such as 3-D design and 3-D printing. If we could lighten that burden, we’d see more incremental investment.”
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For context, FDRA president and CEO Matt Priest recounted an increasingly familiar statistic surrounding the shoe industry’s tax treatment: “We’re overly regulated, and we pay almost $3 billion in duties every year — and that’s before the Trump administration makes any more add-ons to that.” (The Trump administration has recently taken an aggressive stance on trade with China, unveiling sweeping tariffs on aluminum and steel in March and another round of $50 billion in tariffs in April against a range of made-in-China high-tech items.)
With 100 percent of shoes — or 2.4 billion pairs — sold in the United States imported from countries such as China and Vietnam every year, Peter Bragdon, Columbia Sportswear’s EVP, chief administrative officer and general counsel, said his firm is now the 53rd-largest duty payer in the United States.
“The way we look at it is, the largest footwear and apparel design center [in the United States] is on Capitol Hill, Washington D.C.,[and how it implements taxes and tariffs] is at the center of what is designed and sold in the United States,” Bragdon said. Rick Muskat, owner of Deer Stags, reinforced the point, noting that his firm — which designs a large portion of children’s shoes sold at retailers such as Shoe Carnival and Rack Room Shoes — has been compelled to sacrifice quality for cost.
“We design and engineer shoes [to circumvent] tariffs — we have to design away from quality and away from style to [supposedly] protect U.S. footwear manufacturers [who don’t actually exist],” Muskat argued. (A primary objective of import duties and tariffs is to protect domestic manufacturers.
Ultimately, the biggest burden of hefty duties and tariffs, Wolverine’s Jeppesen and Chinese Laundry’s Namgyal noted, falls on the consumer.
“We are a 100 percent imported business, and last year, we paid $84 million in duties, [most of which] was unfortunately passed on to the consumer,” Jeppesen said, adding that a shoe that costs $20 to produce in China can end up costing $90 for the end user, who absorbs a $9 duty cost.
Family footwear retailers have had a particularly tough time with tariffs, according to Shoe Carnival’s Sifford and Rack Room Shoes’ Barr.
“We’re moderately priced — our customer has a family income of $100,000 or less — so we’re always watching price,” said Sifford. “Prices haven’t risen as much over the past 10-15 years as you might think, which makes it even harder for us to turn a profit. Because as prices go up in the factory, we’re not able to pass all those prices off to our customer [and remain competitive].”
For his part, Andy Gilbert, president of Licensed Brands at Genesco, said in a bid to produce quality shoes for the company’s stable of brands — which includes Johnston & Murphy and Schuh — the company has been “chasing cheap labor around the globe” for years.
What’s more, Nyamgal said tariffs — as well as mounting fears that footwear may not remain unscathed by Trump’s wave of duties — are affecting Chinese Laundry’s ability to ward off new competition from global fashion players.
“The prices [at retail] haven’t gone up, so the concession is on [us brands] to hold our price points. Something has to give,” she said. “It’s now a global marketplace — some of the biggest retailers today are Zara — and when we’re hit with tariffs, we can’t compete.”
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