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Trade Negotiations - Shoe Industry Leaders on Edge After Latest Round of US-China Trade Talks
02 August 2019


Samantha McDonald of Footwear News writes that negotiators from the United States and China have wrapped up another round of high-level trade talks in Shanghai, with a September meeting already scheduled in Washington, D.C.

Following Tuesday’s dinner and a four-hour discussion on Wednesday, Chinese state broadcaster CCTV reported that the delegates — with the U.S. team led by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin — had “frank, efficient and constructive in-depth exchanges” on major issues, including China’s purchase of agricultural products from the U.S.

It marked the first face-to-face discussions between the two countries since failed negotiations nearly three months ago, leading to President Donald Trump’s tariff hike from 10% to 25% on $200 billion worth of Chinese imports and threat to increase levies on another $300 billion worth of products. (Last month, Trump and China’s President Xi Jinping met on the sidelines of the G20 summit in Osaka, Japan, where they agreed to reconvene on trade.)

While both parties appear willing to continue talks, the recent two-day gathering produced little breakthrough, with footwear industry leaders on edge as Trump’s proposed 25% levy on the fourth tranche of tariffs — which would have impacted footwear, apparel and other accessories — remains in suspension. (The list encompasses nearly every remaining untaxed item imported from China.)

“The president at a whim could lock in additional tariffs, and that’s concerning,” said Matt Priest, president and CEO of the Footwear Distributors and Retailers of America. “The prevailing view is that we have this very fragile state where nothing seems imminent, but that can easily change.”

The worries are likely intensifying after the conclusion of seven days of public hearings in June — when the USTR allowed businesses and consumers to share their testimony regarding Trump’s additional duties — meaning a decision on the fourth tranche could come in the near future. (Macy’s, JCPenney, Steve Madden and Marc Fisher were among the companies to give testimonies opposing new tariffs at the UTSR hearings.)

“With each passing day American businesses and American consumers are paying millions in additional taxes on everyday products,” said Rick Helfenbein, president and CEO of the American Apparel and Footwear Association. “We do not see taxing Americans as an appropriate negotiating strategy. Meanwhile, we continue to find ourselves in an uncertain business environment with the looming threat of additional tariffs on $300 billion worth of goods still on the table.”

As costs grow within the supply chain, many corporations have indicated that they may be left with no choice but to raise prices for consumers. Such tariffs would also affect domestic manufacturers — considering that many materials necessary for production are sourced through China and unavailable in the U.S. — as well as footwear jobs, with a smattering of member companies already making attempts to relocate their supply chains to neighboring countries like Vietnam, Indonesia and even America’s southern neighbor, Mexico.

“Each company is different,” Priest said. “A big portion of the industry has been quickly diversifying out of China anyway. The others are crossing their fingers and holding their breaths, hoping that tariffs don’t come.”

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