Tariffs And The Footwear Industry

Aug 24, 2019
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SCOTT SIMON, HOST:

China and the U.S. have added more heat to the trade war. President Trump announced the U.S. would increase tariffs on two classes of goods from China an additional 5%. That's in response to $75 billion worth of tariffs that China levied earlier this week.

Matt Priest is president and CEO of the Footwear Distributors and Retailers of America. Mr. Priest, thanks so much for being with us.

MATT PRIEST: Hey, Scott. Thanks for having me. I really appreciate it.

SIMON: I gather you have regular Friday calls with your members. What was yesterday's call like?

PRIEST: Yeah, we do. We do have regular Friday calls with our members, and they're designed to help our members navigate the incoming or upcoming tariffs that the president has announced that he's implementing. And so it's a lot about what - how will Customs treat the goods coming across the border, exactly how much will be added on top of the $3 billion we already pay in duties on footwear. And so as you can imagine, we've had a very active summer since the president announced his desire to put tariffs on just about every single good that comes to the U.S. from China.

SIMON: How much will that raise prices? Can you project?

PRIEST: Well, our first projection at 10% was $3 billion in added goods on footwear and that - as we're going to 15%, we could easily see how that'll push us upwards of $4 billion on - in added goods on footwear. But you know, as your listeners should understand, we already pay exorbitant duties on footwear, and we've been paying them since 1930. And so our duty bill alone last year was $3 billion even before any of these new tariffs took effect.

SIMON: So let's say there's a - we'll make it easy - hundred-dollar pair of shoes. How much might they cost because of tariffs?

PRIEST: I mean, we could easily see an additional $25 - U.S. dollars - on top of that because as prices are assessed at the border and those goods have the tariff added to them as they come across the border, they get sold to a distributor. They get sold to a retailer, then ultimately gets put on the shelf for the consumer.

So each time that those pair of shoes exchange hands, the price gets jacked up even more. And so that's why just a simple 15% tax on top of what we already pay at the border in tariffs will have more than - potentially have more than a 15% price increase for the consumer.

SIMON: So a family - let's say, three kids - who all need new shoes for school - that could be quite a cost increase, couldn't it?

PRIEST: That's right. Yeah - in particular with children because what's really interesting is most children's footwear is predominately China-based. And so when you look at children in - particularly in their shoes, they're more at risk than anything or anybody or any segment of the population because of the fact that most shoes sold - most kids' shoes sold in the U.S. come from China.

And so - yeah, I have three kids myself, all within school age, and their feet are constantly changing. And it's going to cost quite a bit more money just to sell those types of shoes to American consumers.

SIMON: So in the minute we have left, Mr. Priest, the president says that, you know, manufacturing ought to come back to the United States or that at least U.S. retailers ought to move to have more shoes in - made in, let's say, Vietnam and Bangladesh, if not New Hampshire.

PRIEST: Yeah. You know, it - unfortunately, we're kind of the poster child for the fact that duties don't bring manufacturing back. We have exorbitant duties in place for nearly 90 years, and production still left the U.S. And there's just not the capacity and the skill here in the U.S. and the materials that are needed to make shoes. And then the consumer will not take on the price that that shoe will cost because of the labor component based here in the U.S.

SIMON: So even if you could make shoes here in the U.S., you think it'll be at a - what do you say in your business? - a price point that American consumers won't accept.

PRIEST: That's right - exactly right. And so when we bring in almost 2.5 billion pairs of shoes every year, Scott, the question is, where are those shoes going to go? And it's going to be scattered to other Southeast Asian nations. And then the question comes - well, how will the president feel about having a higher trade deficit with those countries moving forward? And that's another concern.

SIMON: Matt Priest, who heads the Footwear Distributors and Retailers of America. Thanks so much, Mr. Priest.

PRIEST: Thank you, Scott. Transcript provided by NPR, Copyright NPR.