Nike, Adidas call China tariffs ‘catastrophic’ in letter to Trump

Bloomberg

Nike Inc, Adidas AG and other footwear companies urged President Donald Trump to reconsider his tariffs on shoes made in China, saying the policy would be “catastrophic for our consumers, our companies and the American economy as a whole.”
In all, 173 companies signed an open letter to the president, and posted on the industry trade association’s website. “On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden,” the group said.
The protest came as US-China trade tensions escalate and Trump threatens to impose tariffs as high as 25 percent on
Chinese goods — including all types of footwear, from sneakers to sandals. While the industry has shifted production away from China in recent years because of rising wages, shifting trade policies and a desire to make more goods at home in the US and Europe, the Asian country remains a shoe giant.
Adidas, for example, sourced about 18 percent of its 409 million pairs last year from China — putting it third behind Vietnam, which made 42 percent of them, and Indonesia at 28 percent. Most production sites are run by independent manufacturing partners.
The German company made
3 percent of its shoes in Europe and the Americas, where it has set up two new “ speed factories” that use robots to churn out high-end shoes in a single day rather than rely on the weeks or months needed to shuttle components among different suppliers. Still, the vast majority of Adidas’s sneakers, apparel and sports equipment gets made in Asia — and probably will for a long time to come.
Tariffs are an especially touchy subject within the footwear industry because shoe companies already pay some of the highest duties in the US, thanks to
longstanding tariffs that in
some cases surpass 30 percent. And this isn’t the first time the industry is feeling the impact of Trump’s trade policies. The recent pivot towards Vietnam production was in part in anticipation of the Trans-Pacific Partnership, which would have allowed duty-fee exporting to the US. Then Trump exited those negotiations.
The US shoe industry’s trade association, the Footwear Distributors & Retailers of America, estimates that the tariffs would cost US customers an additional $7 billion per year. The companies said in their letter that those costs would disproportionately affect working-class individuals. “Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill,” the letter said. “It is time to bring this trade war to an end.”
The letter was also sent
to Treasury Secretary Steve Mnuchin, Commerce Secretary Wilbur Ross and National Economic Council director Larry Kudlow. It followed last week’s list from the US Trade Representative’s office of about $300 billion worth of products that could see higher import duties, including all types of footwear. Trump will discuss the tariffs with Chinese President Xi Jinping next month.
Trump has repeatedly stated that China would pay the tariffs — something his critics say is misleading or wrong. Earlier this month, Kudlow said that “both sides” will pay.
“As an industry that faces a
$3 billion duty bill every year, we can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer,” according to the letter.
Still, the companies in the letter vary in their reliance on China. Nike, for example, made 26 percent of its apparel and 26 percent of its footwear in China in fiscal 2018. German company Puma sourced 24 percent of its products from China, compared with 32 percent from Vietnam.