Many big fashion players have kept mum on President Trump’s escalating trade war with China, but as the reality of higher tariffs draws nearer, more are starting to speak out.
The latest is Steve Madden’s chief executive officer Edward Rosenfeld, who used an earnings call with investors to voice concerns over a fresh wave of 10 percent levies that could hit the industry as early as September.
He warned that the New York-based footwear and accessories company will be left with little choice but to pass some of the cost onto consumers. The majority of the brand’s handbags are made in China and would be subject to steeper duties at the border.
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“We and others will certainly try to pass on a good chunk of this to the consumer in the form of higher retail prices,” Rosenfeld said, adding that back of the envelope math points to a 3.5 percent increase to offset an additional 10 percent duty.
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“In the part of the market that we play in, the vast majority of bags are made in China and so everyone is going to be faced with the same challenge.”
Rosenfeld also said the company, which reported second quarter net income of $32.4 million, is looking into moving more of its handbag production to Cambodia in a bid to beat the extra duties. Currently, about 15 percent of the firm’s handbags are made there and he believes they could double this next year.
The fashion sector emerged relatively unscathed from the first round of tariffs, which targeted $50 billion worth of Chinese imports.
However, the industry was not so lucky the second time through as numerous apparel and accessories categories, such as handbags were included on a list of goods targeted for higher duties. All together, 6,000 goods totaling $200 billion in imports would be subject to additional levies. A date has yet to be set for when this will happen, but it’s thought tariffs could be increased in September, following a two-day hearing in Washington, D.C.
More items, such as shoes, could also soon be dragged into the fray since Trump has threatened to raise levies on all Chinese imports if Beijing further provokes the White House.
After trade tensions eased between the U.S. and Europe last week, many industry watchers had hoped the same would happen with China, but there has been no indication of any changes on either side of the Pacific.