Trump’s Tariff Hikes on China, Vietnam Pose Big Problem For Shoe Firms
Sweeping reciprocal tariffs are here, and footwear and fashion firms, as well as retailers, have a huge problem.
On Wednesday, U.S. President Donald J. Trump declared economic war, imposing in general half of the percentage in tariffs that other countries charge the U.S. The base minimum is 10 percent, but most countries will see much higher percentages.
The new tariff rate for China is 34 percent, or what Trump called a “discount” to the 67 percent in duties that the country charges the U.S.
For Vietnam, the new total is 46 percent, also representing a “discount” to the 90 percent levied on U.S. exports. For the European Union, the tariff is 20 percent, a “discount” from the 39 percent levied on American goods. The U.K., which has a low 10 percent duty on American goods, will see a reciprocal tariff of 10 percent. (The figures were supplied by the White House.)
While some economists worry that tariffs would harm the U.S. economy, Trump said reciprocal tariffs will “Make America Wealthy Again.” And it appears there were no exceptions. “They do it to us, and we do it to them,” Trump said, describing what reciprocal tariffs mean and calling the new plan on duties a “declaration of [American] economic independence.”
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Moreover, Trump emphasized that the impact from tariffs will have jobs and factories “come roaring back into our country, and you see it happening already.” And with more production in the U.S., America will see stronger competition and lower prices for consumers, he said. Trump didn’t provide any details on how quickly the required infrastructure could be put in place—or the investments needed—in order to ramp up production in the U.S.
Industry organizations responded quickly to the dramatic moves, citing a major impact on U.S. consumers.
The Footwear Distributors and Retailers of America (FDRA) CEO Matt Priest has said repeatedly that tariffs hikes on footwear are inflationary for working families.
The FDRA’s Q1 Shoe Executive Business Survey released on Monday indicated growing concerns over rising costs, weakening consumer demand, and ongoing impact from tariffs already in place. The FDRA said footwear executives have never been as pessimistic as they are now. Priest said “surgical actions” are needed to ease the impacts from tariffs and trade policy, both to help American families struggling with rising costs and to support businesses that are vital to America’s economy.
In a new statement on Wednesday, Priest said Trump’s announcement was “catastrophic” for American families. “We had hoped the president would take a more targeted approach, but these broad tariffs will only drive up costs, reduce product quality, and weaken consumer confidence,” Priest said. “Quite frankly, this will accelerate “shrinkflation,” making everyday goods more expensive while delivering less. Our industry is already dealing with inflationary pressures, and this move will force families to think twice before making a purchase. That’s bad for Americans and the economy. We must do better for American families — sooner or later, the president will see that.”
The Retail Industry Leaders Association noted that the American people have been counting on Trump to grow the U.S. economy and end inflation. “Unfortunately, the President’s plan for universal tariffs on household goods – including clothing, groceries, home goods and school supplies – will raise costs on every American family. The President’s plan is not a targeted attempt to protect American innovation or national security but will hit every family’s budget. Americans cannot afford another round of price increases,” said Michael Hanson, senior executive vice president of RILA.
“More tariffs equal more anxiety and uncertainty for American businesses and consumers. While leaders in Washington may not care about higher prices, hardworking American families do,” added David French, executive vice president of governmental relations for the National Retail Federation (NRF), a retail trade organization, who added that the tariffs will be particularly harmful to small retailers.
“Tariffs are a tax paid by the U.S. importer that will be passed along to the end consumer. Tariffs will not be paid by foreign countries or suppliers,” the NRF executive said. “Even more so, the immediate implementation of these tariffs is a massive undertaking and requires both advance notice and substantial preparation by the millions of U.S. businesses that will be directly impacted.”
For fashion and footwear firms, and retailers, the big question will be how to deal with the new tariff policy.
At a CohnReznick webinar this year, Greenberg Traurig’s international trade lawyer Laura Siegel Rabinowitz said that reciprocal tariffs are “going to be very complicated to implement for U.S. Customs.” The international trade expert said that tariffs on foreign goods entering the U.S. will get “very complicated” because it will be both “product specific and country specific.”
Siegel Rabinowitz advocates that firms take a close look at their supply chains, starting with level one suppliers and then drilling down further to their level two, three and four vendors so they know where all the required components for a product are from.
That kind of analysis allows companies to analyze what is the key component that provides the essential character of the product. That’s because duties are determined by product classification, valuation and country of origin. While companies still need to be compliant, shifting the classification or origin could provide a more advantageous result from a duty perspective, she said.
There’s no escape when reciprocal tariffs are in play across the board, but some wiggle room in shifting classification or origin could enable companies to be compliant and still lower the total amount of duties owed.
While footwear firms have been shifting production out of China, it is still the biggest sourcing market in the industry by far, although Vietnam has been growing steadily.
A Morgan Stanley report noted that Vietnam has been the “largest beneficiary from diversification out of China between 2019 and 2024. In 2024, 34 percent of U.S. footwear imports were sourced from Vietnam, making the country the largest footwear importer. In addition, Nike now produces about 50 percent of its footwear in Vietnam. Adidas is slightly lower at nearly 40 percent. For luxury footwear, data from the FDRA indicates that the top producers are Italy, Germany, Portugal, Spain and Morocco. Production in France and the U.K. has been on the decline. And Turkey has become a bigger footwear producer.
A Morgan Stanley research note on Monday said the announcement on reciprocal tariffs offers some “incremental clarity on tariff rates and countries/products in scope,” but that is is more of a “maximalist starting point ahead of bilateral negotiations.” That means that policy uncertainty and growth risks will likely persist, although the question is more about to what degree. Moreover, the thinking is that some tariffs will be implemented immediately, while others will be at a future date—a move that sets the stage for negotiations.
Among the consumer discretionary goods, China has the highest risk by U.S. import exposure, along with Vietnam for performance and athletic shoes.
Countries with moderate risk include Canada, Germany, Ireland, Italy, Japan, Mexico, and South Korea. The European Union and India are classified as having less risk, according to the Morgan Stanley report.
Vietnam’s trade deficits with the U.S. stands at over $120 billion, the Morgan Stanley report said. It cited Allbirds, Nike, On Running and Skechers as potentially “most exposed,” with Levi Strauss on the apparel side as “seemingly most protected.”
Allbirds also has a new development center in Vietnam is that set to deliver new concepts, materials and prototypes in the back half of 2025 and into 2026.
The report also noted that one of the primary paradigm shifts will be whether tariffs ultimately focus on where goods are produced as opposed to where they are sourced.
“Given higher costs from tariff barriers and new trade/production channels, firms will have to grapple with very difficult price-versus-volume trade-offs: put the top line at risk of take it on the margin.” Shifting production will entail higher costs, longer lead times and greater investment risk, while the dilemma of where produced versus where sourced could have material implications for corporate balance sheets.
Moreover, even shifting supply chains to mitigate risk has its own set of issues, with possibly the top concern clarity of policy outlook. Ideally, tariff plans should be in place long enough to justify up-front investment costs. But under Trump, clarity of policy could turn into an open-ended question.
NRF’s chief economist Jack Kleinhenz on Wednesday said it expects retail sales will grow in 2025 to between 2.7 percent and 3.7 percent from 2024 levels, reaching between $5.42 trillion and $5.48 trillion. He made the statement during the retail trade organization’s “State of Retail & Consumer” webinar.
Gregory Daco, chief economist at EY Parthenon, which is part of the global accounting firm EY, said he is concerned about tariffs and trade policy because a “tariff shock would further exacerbate” inflationary pressures. Daco noted that some of the trade tensions have already materialized, with businesses such as retailers ordering in advance, actions that increase inflationary pressures and put supply chains under more stress.
Daco said a survey of business executives found that the majority of them, at least 50 percent, said they would pass on two-thirds of the higher input costs from tariffs immediately to consumers. “What that tells you is that there’s not going to be much of a buffer between the import prices and the consumer prices,” he said.
