CNN
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President-elect Donald Trump has promised high across-the-board tariffs on imports into the United States, with a particularly significant tax on goods coming from China. An American company, just two days after Trump’s re-election, says it’s wasting no time getting out of China.
Steve Madden, a $3 billion shoe company, announced Thursday that it would quickly cut its Chinese production in half to avoid Trump’s tariffs. Those plans have been in place for a long time, pending a Trump victory, according to Steve Madden CEO Edward Rosenfeld.
“We have been planning for a possible scenario in which we would have to move goods out of China more quickly,” Rosenfeld told Wall Street analysts on Thursday. “And so, as of yesterday morning, we are putting that plan into motion. And you should expect to see the percentage of goods that we’ve received from China start to come down faster going forward.”
Like all shoe companies, the majority — about two-thirds — of Steve Madden’s business relies on goods that are imported into the United States, the company noted. And of these imports, 70% are from China. So that’s a lot of effort to do.
That’s why Rosenfeld said the company worked for years to create a new network of factories that would allow the company to continue doing business without paying the hefty China tariff that Trump has said could be over 60 %. That’s higher than the various tariffs on Chinese goods that Trump imposed in his first term — and President Joe Biden largely kept in place — that ranged from 30% to 50%.
The point of the tariffs, in theory, is to stimulate American manufacturing by making imported goods relatively more expensive than those made in the US. But here’s the catch: Steve Madden isn’t moving his production to the United States. She said I will source her goods from Cambodia, Vietnam, Mexico, Brazil and some other countries.
In addition to his steep proposed tariff on China, Trump campaigned on tariffs of 10% to 20% on everything coming into the United States. So Madden may be the first American company to move production out of China because of Trump’s proposals — but it probably won’t be the last. And Americans don’t have to wait for all that production to come back to the United States.
Rosenfeld said Thursday that the company over the next year will reduce the percentage of goods it receives from China to between 40% and 45%.
“If we’re able to achieve that — and we think we have the plan to do it — a year from now, we’d be looking at a little over a quarter of our business that would be subject to potential charges for Chinese goods.” said Rosenfeld.
The retail industry has been crying foul about Trump’s tariffs for a long time — especially apparel and footwear companies. The National Retail Federation last week found in an analysis that the price of a $50 pair of sneakers would rise to $59 to $64 under Trump’s tariffs. And Americans would pay up to $24 billion more for clothing each year because of projected cost increases.
Apparel companies rely on China’s cheap labor costs and highly efficient manufacturing capabilities to quickly deploy workers to make new products for the American market as fashion sensibilities change. If a shoe company makes the wrong bet on a trend, it can be disastrous for the business with long-term financial implications.
U.S. labor laws, wage scales—and the fact that America simply doesn’t have as many people as other countries who want to make things—mean that making shoes in the United States simply doesn’t make business sense for most companies. big.
Speaking to Wall Street analysts on Thursday, Laura Champine of Loop Capital Markets asked Rosenfeld to predict the financial pain that would be inflicted on the company as it abandons China.
“Obviously, you were there for a reason,” Champine pointed out.
Rosenfeld said it’s too early to tell because the tariffs will have a far-reaching and as yet immeasurable impact around the globe.
“I think it’s really hard to quantify the potential impact here,” Rosenfeld said. “And especially if we’re thinking, a new policy where there are significant tariffs on China, that’s going to have all kinds of far-reaching implications, not just in the supply chain, but in the overall economy.”
Trump’s tariffs have been widely criticized by mainstream economists. Because companies pay import tariffs and pass them on to consumers, Trump’s proposal is akin to a $3 trillion tax hike, according to Douglas Holtz-Eakin, president of the center-right American Action Forum. Trump’s tariffs could cost the typical middle-income American family more than $2,600 a year, according to research from the Peterson Institute for International Economics.
But Steven Mnuchin, who served as Treasury Secretary for all four years of President-elect Donald Trump’s first term, told CNN’s Jake Tapper on Thursday that Trump would be “very careful” not to reignite inflation with fee.
“I think President Trump clearly understands the impact of inflation and I think he’s going to be very careful,” Mnuchin said of Trump’s tariff plans.
Mnuchin also said that in Trump’s first term, tariff exemptions were granted “for things that would have an impact on American companies.”
“But we did it very strategically,” Mnuchin added.