‘There’s lots of concern’: Why footwear is one of the industries most susceptible to tariffs
For years, entrepreneur NiK Kacy, who launched their eponymous gender-neutral shoe brand in 2013, has manufactured their footwear in Mexico and worked with third-generation shoemakers. “I have loyalty to them,” Kacy told Modern Retail. “They’re passionate about what they do.”
Now, with a 25% tariff on all Mexican imports in place as of March 4, Kacy is struggling to sustain their existing supply chain. They don’t want to pull production out of Mexico, they said, nor do they want to raise prices. Tariffs aside, “it’s already hard to compete with these large multibillion-dollar companies,” they said.
Kacy is one of millions of retail leaders trying to find a way forward as U.S. President Donald Trump slaps import tariffs on a wide range of goods. Countries are issuing retaliatory duties in response, and Trump is vowing to enact even more tariffs on April 2. Trump also imposed tariffs during his first term in office, the effects of which are still being felt today.
All of this is a perfect storm for any industry, but particularly for footwear, which is especially susceptible to tariffs. Some 99% of footwear sold in the U.S. today is imported, according to the Footwear Distributors and Retailers of America, a trade and business association representing more than 500 companies across the U.S. According to the FDRA, the U.S. imports 2.4 billion pairs of shoes a year — enough for seven pairs per person.
Footwear, like apparel, largely relies on other countries for manufacturing. Producing footwear requires significant capital, heavy machinery and a sizable workforce — not to mention established supplier relationships, product safety standards and chemical safety oversight. Only a handful of sourcing countries, many of which are in Asia, have the existing infrastructure to accommodate demand. These include China, Vietnam, India and Indonesia. For its fiscal 2024 year, Nike manufactured 50% of its Nike brand footwear in Vietnam, 27% in Indonesia and 18% in China.
Building this capacity in the U.S. — and thereby avoiding tariffs — would be a tall task. There are dozens of components that go into footwear, and for the U.S. to make an entire shoe at home, it would need to supply everything from cotton for laces to plastic for eyelets to rubber for soles. Developing this supplier base “would take decades,” the FDRA wrote in a March 11 letter to the U.S. government. The country would also have to “hire and train thousands of workers in the intricacies of shoemaking,” the FDRA said, noting that some of its members have already found there to be “a lack of interest [from] workers wanting to work in a shoe factory.”
Because so much U.S. footwear is imported, tariffs are already high. The FDRA estimates that footwear is taxed at an average of 12.3%, compared to less than 2% for other consumer goods. Trump-era tariffs are only exacerbating this, Matt Priest, the CEO and president of the FDRA, told Modern Retail. “We’ve had tariffs in place since 1930, so this is just adding insult to injury,” Priest explained. Meanwhile, Ali Furman, consumer markets industry leader at PwC, told Modern Retail that overall import costs for footwear could increase to 40-50% because of new tariffs.
Kane, a footwear brand that makes recovery shoes, manufactures in Brazil. The company is “praying” that the U.S. won’t enact additional tariffs, its founder and CEO John Gagliardi told Modern Retail. “We can’t control that, but that’s something we talk about,” he said. As a contingency measure, Kane is preemptively increasing the inventory it has on hand in the U.S. “We’re just trying to get more product in before something happens,” Gagliardi said. “But we’re not changing our production.”
PWC estimates that Trump’s new tariffs — as well as any reciprocal ones — will cost the footwear industry $5.9 billion a year. Some footwear brands and retailers plan to pass this on to consumers via price increases; ninety-seven percent of respondents to a recent FDRA survey said they would do so. That level is “unheard of,” Priest said. “We’ve done this survey for four years, and it’s the worst outlook we’ve ever published.”
This is worrying because footwear prices are already high, said Beth Goldstein, a footwear analyst with Circana. In fact, footwear prices are up 30% since 2019, she told Modern Retail. Much of that is because of supply chain delays and material shortages due to the pandemic. But, Goldstein said, this is likely to be the new normal.
“Footwear is not an industry like food or gas where, when costs go back down, [companies] are going to lower the price,” she said. “The MSRP [manufacturer’s suggested retail price] is now at a high level, … and consumers are already feeling the pain.” If prices increase even more, “we would probably see unit demand start to slide again,” Goldstein said.
Priest agreed. “When the import price goes up, the retail price goes up,” he said. “And when you drive up prices, you drive down sales. There’s lots of concern out there in the marketplace, for sure.”
Back in November, the National Retail Federation estimated that U.S. consumers could lose $46 billion to $78 billion in spending power each year that the tariffs are in place. For footwear, specifically, customers can expect to pay $6.4 billion to $10.7 billion more a year, according to the NRF.
While Trump may be counting on tariffs to boost products “made in America,” that’s easier said than done for footwear, sources say.
“You would think by the political rhetoric [that] the administration really wants to encourage domestic production with the tariffs,” Priest said. However, he noted, the typical sneaker already has an estimated 20% tariff on it, including a 7.5% tariff added during Trump’s last term.
“They have rhetoric, but the policy doesn’t line up with that rhetoric,” Priest said.