Fashion’s getting ready to give President Donald Trump a piece of its mind with top executives warning of dire consequences if he ratchets up tariffs in his trade war with China.
Higher prices for already-squeezed consumers, job losses and store closures are all in the offing if the administration boosts tariffs on Chinese-made apparel and footwear by 25 percent, according to letters from a host of major American retailers sent to U.S. Trade Representative Robert Lighthizer.
Those tariffs would come on top of average duties of roughly 13 percent already paid for apparel and footwear from China, according to the American Apparel & Footwear Association. (Levies on individual categories can peak in the low 30s for apparel and the mid-60s for footwear, on a percentage basis).
The written statements from fashion’s c-suite come ahead of hearings in Washington, D.C., next week, where the brands will have their last chance to make pleas before Trump is expected to make his final decision.
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Patrice Louvet, president and chief executive officer of Ralph Lauren Corp. warned in his letter, “Additional tariffs on clothing, footwear, accessories and other consumer goods, already currently among the most heavily taxed product commodities, will result in higher costs for goods and services to the average cost-conscious U.S. family, which will in turn lower apparel and footwear sales, resulting in loss of jobs for U.S. workers.”
The ceo also discounted Trump’s claims that companies could simply shift production out of China, arguing that for certain products, other countries do not have the capacity or capability to manufacture them due to technological or workforce constraints.
“For this reason, we are not able to quickly or simply shift all manufacturing to other sourcing countries, resulting in price increases for the average U.S. consumer. This ultimately undermines American competitiveness,” Louvet said.
Ralph Lauren has been cited by analysts as particularly vulnerable to tariffs due to its reliance on China-sourced goods, but it is by no means alone, or the most threatened.
In fact, the breadth of companies weighing in — from Ralph Lauren to Steve Madden to Forever 21 and beyond — illustrates just how dangerous the trade war is for fashion and how many companies are standing in the crossfire. In an already competitive environment, the companies say there is little excess in their cost base and that the duties will go almost instantly to shoppers, who are seen revolting.
Edward Rosenfeld, chairman and ceo of Steve Madden, which sourced 94 percent of its products from China last year and generated 88 percent of revenues in the U.S., said additional tariffs on footwear imports would immediately force the company to raise prices and in turn dampen sales.
“Knowing we serve a price-conscious shopper, these price increases will depress sales which in turn will force us to close stores and lay off workers,” he said.
He, too, chimed in on the difficulty of shifting production out of the Asian giant: “Years of planning are required to make sourcing decisions and the establishment of new capacity outside of China and the movement of production to new facilities cannot happen overnight. Any additional duties will immediately impact our customers.”
This sentiment was further echoed by Patrick Fox, senior director of customs and trade strategy at VF Corp., which owns Vans, The North Face and other brands.
Fox said VF invests significant resources and effort to operate efficient and compliant supply chains throughout the world that are embedded with important worker safety and environmental standards. Over the past several years, it has reduced its production in China and shifted sourcing to other countries and regions in a methodical process to ensure compliant supply chains are established, but the prospects of continuing this process while also paying high tariffs on products still being produced in China is “daunting.”
And while Trump has suggested retailers could even bring production back to the U.S., tariffs might actually have the opposite effect, according to sneakers brand New Balance Athletics, Inc. It has produced goods in the U.S. for over 75 years, but cautioned that the tariffs will threaten its ability to continue do so.
“The unfortunate reality is that when the rest of the footwear industry moved offshore years ago, it took the domestic supply chain with it. The limited supply chain that exists today in the U.S. is simply too small to support the scale of U.S. footwear manufacturing that we have worked so hard to maintain,” said Monica Gorman, vice president of responsible leadership and global compliance at New Balance.
“We are deeply committed to working with domestic suppliers wherever and whenever possible…yet we also know from firsthand experience just how limited and fragile the footwear supply chain is in the United States. We must import certain footwear components, such as soles, inserts, kits and uppers, from China to keep our five New England factories open and growing.”
Lawyers representing Forever 21, meanwhile, stressed that a very large proportion of products sold by the retailer appear to be in the firing line for tariffs and that there is “simply no way to avoid” raising prices if they are imposed, which would significantly negatively impact sales for the highly price-sensitive business.
As a result, tariffs could potentially result in layoffs in multiple states, the elimination of season hiring and possible store closures, they said.
Elsewhere, attorneys for Brendan Hoffman, ceo of Vince Holding Corp., said that he would be present at the hearings next week to request that apparel products that are made of cashmere and silk be excluded from the potential 25 percent tariff increase.
That’s because these fiber sources are only available in China in the quality and quantity needed by the apparel industry for these types of products.
Katia Kelso, director or production at Ulla Johnson, added that China is a vital source for the designer as it provides high-quality manufacturing, expertise and manufacturing infrastructure — which no longer exists in the same capacity in the U.S.
“A trade such as pattern-making and sewing is a career path the younger generation is not choosing to enter today. The implementation of a 25 percent tax on the products…will result in an increase in the price of our products, which could place what we pride as quality products out of reach for our American customers,” she said. “Ulla Johnson is on a growing curve at the moment, but these tariffs will drastically impact our ability to expand and grow. As a small business, we urge to consider the above before increasing the tariffs.”
Other companies in the fashion industry that submitted written testimonies include Ascena Retail Group, Weyco Group Inc., Fila, Tura Inc., and Marc Fisher.
Trump advised last week that a final decision would be made after the G20 meeting in Japan scheduled for the end of June. That is the first time he is expected to meet with China’s President Xi Jinping since trade negotiations between the two sides imploded last month.
But still, when it comes to Trump’s negotiating tactics, almost anything could happen.
On Wednesday, when asked when was the deadline for a trade deal with China, Trump responded, “I have no deadline. My deadline is what’s up here,” and pointed to his head.