According to trade groups, major retailers and industry leaders, American consumers might soon have to fork over more of their hard-earned dollars to buy the same products they do now — as companies may be left with no choice but to increase costs in response to the inflating levies.
“Companies are really doing a lot of scenario-planning to try and figure out how to live in a world where footwear from China is met with a 25 percent tariff,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “Uncertainty is the watch word right now, and finding ways to eliminate that uncertainty is ‘job No. 1.'”
According to the AAFA, 41 percent of apparel, 72 percent of footwear and 84 percent of accessories sold in the U.S. comes from China. The U.S. has already placed tariffs on $250 billion in Chinese goods, with accessories such as handbags and wallets subjected to 10 percent levies. That figure is set to climb to 25 percent come January.
Trump has also threatened tariffs on an additional $267 billion worth of imports. If implemented, the total amount of duties would hit $517 billion. (Beijing, on the other hand, has retaliated with levies on $110 billion in American imports.)
In a recent interview with CNBC’s Jim Cramer, PVH chairman and CEO Manny Chirico warned that the global clothing business — parent to Tommy Hilfiger and Calvin Klein — would have to raise prices to make up for the mounting tariffs.
“The unfortunate thing about it is who’s going to be hurt by this is the consumer,” he said, explaining that just under 20 percent of the company’s U.S. production originates from China. “Given that over half our sales are outside of China, it represents about 7 to 8 percent of our cost of goods sold” — or about $70 million of PVH’s business, he added.
Retail behemoth Walmart and department store chain J.C. Penney expressed their concerns in letters addressed to U.S. Trade Representative Robert Lighthizer in September. “Either consumers will pay more, suppliers will receive less, retail margins will be lower or consumers will buy fewer products or forego purchases altogether,” Walmart’s memo read.
And in a September sit-down with Bloomberg, Gap CEO Art Peck noted that although majority of the company’s products hail from Vietnam, about 22 percent are Chinese-made. “In some cases, we’ll have no choice but to pass the impact of these tariffs through to our consumers,” he said.
Columbia Sportswear, Vans and Steve Madden have also indicated a need to drive up costs due to tariffs — with the latter even looking to shift production to Cambodia.
With Trump scheduled to meet with Chinese President Xi Jinping tomorrow, many industry leaders are undoubtedly hoping for a new trade deal. But even though the two world leaders reach a truce, both businesses and consumers aren’t in the clear just yet.
“I think the effects of the last year, regardless of what happens over the next 18 months, will reverberate dramatically for a good 5 to 10 years or longer,” Lamar told FN. “If the trade war gets worse or escalates, then that long-term impact will be even much longer.”
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