Companies Are Already Exiting China to Escape Trump’s Tariffs
(Bloomberg) -- Steven Madden Ltd. is accelerating plans to shift production out of China after Donald Trump’s victory in the US presidential election raised the odds of increased tariffs on imported goods.
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The shoe retailer now aims to reduce goods manufactured in China by 40% within the next year, up from its prior target of a 10% reduction.
“As of yesterday morning, we are putting that plan into motion,” Chief Executive Officer Edward Rosenfeld told analysts on an earnings call Thursday.
Consumer companies are racing to get ahead of potential tariffs and warning about the impact they may have on the price of everyday products. Trump has threatened to slap a 60% tariff on goods imported from China, and as much as 20% on items from other countries, to encourage more domestic manufacturing. US-based companies have long relied on Chinese factories because they can produce goods more cheaply.
“If we are contemplating a new policy where there are significant tariffs on China, that’s going to have all sorts of wide-ranging implications not only in the supply chain, but the overall economy,” Rosenfeld told analysts.
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Whirlpool Corp., which makes Maytag and Amana household appliances, expects Americans will see higher prices on microwaves if tariffs are increased.
“The biggest thing we get out of China is microwaves,” Chief Financial Officer Jim Peters said in an interview before the election. At the same time, Peters said Whirlpool would be more insulated from the risk than other manufacturers because it produces most of its good sold in the US domestically.
Cat litter made with silica gel would also likely experience price hikes, according to Oil-Dri Corp. CEO Dan Jaffee. The company, which makes Cat’s Pride and Jonny Cat litters, said China is the only place to source this material.
Church & Dwight Co. has already moved some production out of China, most notably for its Waterpik oral-care business.
“There are plans in place and actions that we’ve taken to mitigate that impact,” CFO Rick Dierker said last week in response to a question on tariffs. “Just like everybody, we’re well aware of implications there.”
At Steven Madden, just under half of its current business would be potentially subject to tariffs on Chinese imports. If the company’s plan to mitigate its exposure is successful, that would drop to around 25% within the next year. The company has been shifting its supply chain more toward Cambodia, Vietnam, Mexico and other countries.
Several years ago, the retailer imported nearly 95% of the products it sells in the US from China. Rosenfeld had previously said that it would be difficult for Steven Madden to cut its reliance on China by more than 10% each year. On Thursday, he didn’t spell out how the company would meet the accelerated schedule. “We think we have the plan to do it,” he told analysts.
(Updates with additional details beginning in the fourth paragraph.)
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