TARIFFS

HOW TARIFFS HAVE SHAPED THE RETAIL FOOTWEAR LANDSCAPE

From the perspective of an Old Shoe Dog

By Alan Miklofsky

September 10, 2024

Introduction

During Donald Trump's presidency, tariffs on various consumer goods, including footwear, significantly impacted the retail industry. This article provides a comprehensive review of how these tariffs influenced the footwear market, examining the changes, challenges, and consumer responses from the perspective of a seasoned industry observer.

Tariffs Overview

1. Section 301 Tariffs: As part of the trade dispute with China, the Section 301 tariffs imposed on Chinese-made footwear ranged from 10% to 25%, depending on the product category. This had a notable effect on the U.S. footwear market, given the substantial volume of shoes imported from China.

2. USMCA: The United States-Mexico-Canada Agreement (USMCA) replaced NAFTA and included changes to trade rules, including those affecting footwear. While the USMCA did not introduce new tariffs on footwear, it updated trade regulations and rules of origin, potentially altering the dynamics of trade among the U.S., Mexico, and Canada.

Impact on the Footwear Industry

1. Increased Costs: The Section 301 tariffs led to higher costs for importing footwear from China. Retailers and manufacturers often passed these costs onto consumers, resulting in increased retail prices for footwear.

2. Supply Chain Adjustments: To mitigate the impact, some companies shifted their sourcing to countries outside of China or absorbed some of the cost increases. These adjustments were challenging and time-consuming, affecting both pricing and product availability.

3. Consumer Impact: The overall increase in retail prices was particularly noticeable for products heavily sourced from China. This price increase had several downstream effects on the market.

Industry Response

1. Legal Challenges: Footwear organizations and companies filed lawsuits challenging the legality of the tariffs, arguing they violated trade agreements. Many of these challenges were unsuccessful, with the courts largely upholding the tariffs.

2. Lobbying and Advocacy: Trade associations, such as the Footwear Distributors and Retailers of America (FDRA), lobbied against the tariffs, highlighting their negative impact on consumers and the industry. While they succeeded in drawing attention to the issue, significant changes to the tariff policy were limited.

3. Public Appeals: The industry made public appeals through comments during hearings, media campaigns, and engagements with lawmakers. These efforts led to some product-specific exclusions but did not result in a substantial rollback of the tariffs.

Economic and Consumer Effects

1. Inflation: The tariffs contributed to broader inflationary pressures as increased import costs were passed on to consumers, leading to higher footwear prices.

2. Reduced Demand for Higher-Grade Footwear: Higher prices led some consumers to trade down from premium to more affordable footwear options. This shift impacted the sales of higher-end brands.

3. Changes in Purchasing Patterns: Consumers began delaying purchases or seeking discounts more aggressively, affecting sales volumes and profit margins for retailers and manufacturers.

Conclusion

The tariffs imposed during Trump’s administration had a profound impact on the footwear industry. While there were some efforts to mitigate the effects, the broader tariff framework remained largely intact, leading to increased costs, shifts in consumer behavior, and overall inflation in the footwear market. As policymakers consider additional tariffs or trade policies, it's important to recognize that similar consequences could arise. Increased tariffs may further drive up costs, alter consumer spending patterns, and challenge the retail landscape.

Moreover, the inflationary pressures resulting from higher tariffs can severely impact independent retailers. These businesses often struggle to absorb increased costs and maintain competitive pricing, which can make it difficult for them to offer a wide selection of top-tier products. The resulting higher prices and reduced product availability can drive customers to larger retailers or alternative sources, further straining the viability of independent stores. In the worst cases, these economic pressures can threaten the very existence of smaller, specialized retailers, underscoring the need for thoughtful consideration of the broader impacts of tariff policies on the retail ecosystem.

______________________________________________________________

Alan Miklofsky is a semi-retired Professional Shoe Dog with a distinguished career in the footwear industry. Over the decades, he successfully ran an award-winning shoe business while dedicating 29 years to the National Shoe Retailers Association (NSRA) Board of Directors, including serving as Chairperson from 2009 to 2011. Today, Alan channels his expertise into creating content on issues vital to independent shoe retailers and offering consulting services with a focus on financial oversight. Learn more about Alan Miklofsky on LinkedIn. 

mikofskyalan@gmail.com

520-490-5290