Trump & Trade: Fashion Execs Break Down the Biggest Challenges

Trump, taxes and trade took center stage at the American Apparel & Footwear Association Executive Summit, which was held earlier this month in Washington, D.C.

During a spirited industry executive panel discussion, the AAFA’s Steve Lamar, VF Corp.’s Thomas Glaser and TexOps’ Juan Zighelboim lamented a border-adjusted tax proposed by Republicans in the House of Representatives.

AAFA president and CEO Rick Helfenbein, who moderated the panel, criticized the provision that some Republicans have dubbed a “destination-based” cash-flow tax. “I don’t know where the destination is — could be bankruptcy,” Helfenbein said sarcastically to a room of summit attendees on March 2.

AAFA summit
Left to right: Helfenbein, Glaser, Zighelboim and Lamar.
CREDIT: Courtesy of AAFA.

Indeed, consumer shifts and mounting competition from e-commerce players have led a significant number of footwear and apparel retailers to Chapter 11 during the past two years, and many industry executives in attendance fear that a new tax could be the nail in the coffin for their businesses.

Here, AAFA EVP Lamar breaks down retail’s worries and his organization’s go-forward strategy.

Footwear News: How would you describe the general mood of the executive summit attendees this year?
Steve Lamar:
As always, [there was] lots of interest in what is going on in Congress and the new administration in the White House, but this year that strong interest was filtered through a deep veil of uncertainty.

What are the biggest issues for the shoe and apparel industry stemming from a potential border adjusted tax?
We are concerned that the proposal would dramatically increase the tax burdens of companies that import finished products into the U.S. This is because companies would no longer be able to deduct their costs of goods sold from their income taxes. This would dramatically increase tax burdens, despite the decrease in tax rate, which would directly result in higher prices at the register, layoffs and potentially bankruptcy. While we are very supportive of comprehensive tax reform, this proposal would unfairly target our industry and anyone that imports goods.

What would be an ideal tax scenario under the Trump administration?
Our industry is among the most heavily taxed industries at the border. Last year, the U.S. government collected about $34 billion in tariffs from all importers. Our industry paid about $14.5 billion, or about
42 percent. Paying these costs means we have fewer resources to hire Americans, invest in innovation or pass along savings to consumers. An ideal scenario would involve lowering this burden and hidden tax.

Now that the Trans-Pacific Partnership is out the window, what would be some beneficial trade deals for companies?
TPP would have meant an immediate savings of $1 billion in the first year of its implementation. While nothing on the horizon can immediately take its place, we believe there are opportunities for savings with agreements with countries such as Vietnam and Japan.

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