The latest tariffs could make your shoes a lot more expensive
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Illustration: Sarah Grillo/Axios
If there's one theme from the first wave of President Trump's tariff warning letters, it's this: You may pay a lot more for your next few pairs of shoes.
The big picture: Almost every shoe sold in the U.S. is imported, and the vast majority of those imports come from places like China, Vietnam, Indonesia, Cambodia and Bangladesh.
- Those countries now face tariffs of anywhere from 20% to 40% — not quite as bad as feared in April, perhaps, but still enough to potentially impact the market.
By the numbers: The Yale Budget Lab estimated late Monday that the new tariffs, as imposed, would raise some categories of shoe prices as much as 37% in the short term.
- Assuming the tariffs stay in effect, over the long run those prices would be 18% higher than they are today.
The intrigue: The fashion industry says it was already paying an effective tariff rate more than five times higher than other industries, due to existing levies on things like footwear.
- It's still not clear — because so little information has been released — how some of these new tariffs will interact with, or potentially replace, those older duties.
- "They've been putting tariffs on every product from just about every country for a couple of months now, so this is sort of a continuation of the news we've been dealing with and working with for a while now," Steve Lamar, CEO of the American Apparel & Footwear Association, tells Axios.
- "It's really hard, for sure, to know what those final details are going to look like."
Yes, but: The one thing that is certain, Lamar says, is the impact if these new levies aren't negotiated away.
- "If these high tariff rates are allowed to persist, these runway looks today are going to be replaced with runaway prices tomorrow."
Manufacturers vs. retailers vs. consumers
Zoom in: If that's the case, someone — or everyone — has to pay as these higher costs hit the supply chain.
- As KPMG noted in a new study out this week, 57% of large companies say their margins are already being compressed by tariffs, and 77% plan to pass along their costs in the next six months.
What they're saying: "It's the manufacturers that are going to be impacted more than the retailers," Arun Sundaram, a senior vice president at CFRA Research who covers retailers, told Axios.
- Large retailers have more tools to mitigate the impact of tariffs, according to Sundaram.
- Suppliers for retailers, like Nike for Walmart, may be hesitant to raise prices until they see peers do that first.
- That could lead to profit margins for the suppliers and manufacturers being more heavily hit by tariffs than the retailers themselves.
What we're watching: Many of the big-box retailers report earnings in August, right after the tariff deadline passes.
- These companies probably "won't give investors a lot of clarity," according to Sundaram.
- This could give them another earnings season pass, where executives can blame guidance, or lack thereof, on uncertainty.
The bottom line: Just like the last few months, for most businesses, there's little choice but to stand by, watch the trade war play out, and hope.
- "People are waiting for clarity, and so those decisions that can be delayed are being delayed — delay in hiring, delay in investments, delay in sourcing decisions," the AAFA's Lamar said.
- "It really still is a chilling environment."
