Vans, the 52-year-old brand best known for its
unassuming slip-on sneaker, is on a tear. Vans' annual revenue topped $3
billion last year, up nearly tenfold from a decade earlier, propelled
in part by cheap and plentiful manufacturing in Asia.
But
looming tariffs could ground Vans and other footwear brands.
Ninety-eight percent of shoes are manufactured abroad, with nearly
three-quarters of those imports coming from China, according to the
American Apparel & Footwear Association, making footwear one of the
most heavily imported products. Shoes are not on the list of goods
expected to be hit by the latest round of tariffs, but the industry is
on high alert after President Trump said Friday he was prepared to
extend tariffs to all $500 billion worth of imports from China. “I’m ready to go to 500,” he told CNBC.
"We
would be asleep if we weren’t concerned about it,” Scott A. Roe, chief
financial officer of VF Corporation, the parent company of Vans, as well
as a dozen other brands including Timberland, Reef and the North Face,
said in an earnings call Friday. “We are watching this very carefully.”
Earlier
this month, the United States imposed tariffs on $34 billion worth of
Chinese imports, including cars and industrial machinery. Shortly after
that, Trump said he would pursue further tariffs on an additional $200
billion worth of Chinese goods.
Shoe
companies rely heavily on Chinese-made goods, despite efforts in recent
years to move more of their operations to such countries as Vietnam and
Cambodia. Last year, the United States imported $14.8 billion worth of
shoes from China, making footwear the fifth-largest category of Chinese
imports, according an analysis of census data by the American Enterprise Institute,
a conservative think tank. (Other top imports: cellphones, $84 billion;
computers, $67 billion; toys, $28 billion; and furniture and bedding,
$27 billion.)
The
shoe industry already pays nearly $3 billion a year in tariffs, much of
it dating to legislation from 1930 that was meant to protect U.S.
manufacturing during the Great Depression. Canvas shoes, such as the
ones Vans sells, come with particularly hefty tariffs — as high as 68.5
percent, according to industry groups.
“Footwear
tariffs tend to be among the most regressive,” said Nate Herman, senior
vice president of supply chain at the American Apparel & Footwear
Association. “The lowest-priced shoes — children’s fabric tennis shoes
you’d find at Walmart — have the highest tariffs, while higher-end men’s
leather dress shoes are taxed a lot less," about 8.5 percent.
(One
reason for that discrepancy: When the tariffs were originally
negotiated in the last century, Converse, then a leading U.S.
manufacturer, lobbied to levy the highest duties on competing cloth
shoes, Herman said. There are other decades-old holdovers, too: Women’s
and children’s shoes often come with much higher tariffs than shoes for
men.)
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