With Trump tariffs looming, businesses try to ‘run from a moving target’

WASHINGTON — Rick Muskat woke up the morning after the election with an urgent task. He got his agent in China on the phone at 4:30 a.m. Beijing time and pressed him to ask their factory how many more pairs of men’s dress shoes they could make before Chinese New Year, at the end of January.

“I told them if they could make an additional 30,000 pairs, we would take that,” Muskat, the co-owner of a shoe company called Deer Stags, said Thursday.

The impetus was not a sudden jump in demand for shoes but the looming threat of steep tariffs on Chinese products. By stockpiling now, Muskat reckoned, his company could avoid at least some of the levies that President-elect Donald Trump has promised to impose when he takes office in January.

“We’re going to take whatever they can make,” Muskat said.

The election of Trump is already cascading through global supply chains, where companies are grappling with his promises to remake international trade by raising the tariffs the United States puts on foreign products. Trump has floated a variety of plans — including a 10% to 20% tax on most foreign products and a 60% tariff on goods from China — that would raise the surcharge U.S. importers pay to a level not seen in generations.

Much remains unclear about his proposals, including which countries other than China would face tariffs, what products might be excluded and when they would take effect. But given Trump’s history of imposing taxes and the challenges those pose to global businesses that depend on moving products across borders, many executives are not waiting to see what he does.

Some, like Muskat, are preparing to stock up their U.S. warehouses before tariffs might go into effect. Others have been accelerating plans to move out of China, reaching out to lobbyists and lawyers in Washington and calling board meetings to discuss what the tariff threats could mean for their businesses.

As major retailers reported earnings this week, analysts questioned them about the impact that tariff increases might have on their profits. Some downplayed the threats: Oliver Zipse, the CEO of BMW, said tariffs might be only “a verbal issue.”

Others said they were not waiting to see what might actually happen. Edward R. Rosenfeld, the CEO of footwear brand Steve Madden, said Thursday that his company currently sourced more than 70% of its products from China but had “been planning for a potential scenario in which we would have to move goods out of China more quickly.”

“As of yesterday morning, we are putting that plan into motion,” he said. Steve Madden had been making more shoes in Cambodia, Vietnam, Mexico and Brazil, Rosenfeld said, and its goal over the next year was to reduce the percentage of its sourcing from China to only 40% to 45% of its products.

John Donigian, the senior director of supply chain strategy at Moody’s, said the tariffs could lead to higher costs, potential delays and pressure for businesses to shift production closer to North America or into the United States.

All industries would face unique challenges, he said. For electronics, moving production could be slow and costly. For retail and consumer goods that try to keep costs low, inventories could fall and consumer prices rise.

While trade associations representing shoe and clothing sellers congratulated Trump on his victory, they quickly warned against higher tariffs.

Matt Priest, the president of Footwear Distributors and Retailers of America, a trade group, said the average American bought seven pairs of shoes per year, most of which were made overseas and already charged high tariffs when imported.

Priest said the industry had partly moved out of China into countries like Vietnam in recent years. But shoe sellers were “pretty concerned about kind of a Whac-a-Mole trade policy globally that we were going to be hit with additional tariffs coming out of Vietnam,” he said.

“As we head into a second Trump term, all eyes are kind of on what they plan to do, and then how that will obviously impact our costs, which then will impact our consumer,” he said.

In a study published this week, the National Retail Federation argued that Trump’s proposed tariffs on apparel, toys, furniture, appliances, footwear and travel goods alone would cost consumers an extra $46 billion to $78 billion a year.

Trump’s tariffs are aimed at forcing manufacturing activity back into the United States, which he argues will create jobs and cut the country’s reliance on the rest of the world. For some industries with U.S.-based factories, the prospect of higher tariffs may be welcome. U.S. solar manufacturers, for example, have been struggling to stay in business amid a surge of low-cost imports from Asia, even despite receiving new subsidies from the U.S. government.

Timothy C. Brightbill, a lawyer at Wiley Rein who represents U.S. solar manufacturers, said he expected the Trump administration to enforce U.S. trade laws and promote the stability of the domestic solar industry.

“There is bipartisan agreement that we need to continue to rebuild solar manufacturing here in the United States,” he said.

But some business owners say even if big tariffs are imposed, they could not return manufacturing to the United States. They would most likely have to pay the tariff, which would mean raising prices for American customers. Or, if the costs were big enough, they might have to reduce overhead with layoffs.

“We can’t just start making Barbie dolls and Tonka trucks and Care Bears in the U.S.,” said Jay Foreman, the CEO of toy designer Basic Fun. “Not overnight, not in the next 12 months, and frankly speaking, never.”

Foreman said he would consider sourcing from more factories outside China if Trump imposed a 60% tariff on Chinese products. However, he said, taking into account the costs of moving factory equipment, the higher overhead he would need to manage operations in multiple countries, and the higher costs and lower efficiency of manufacturing outside China, it all might “be a wash.”

Moving out of China would pose a “Niagara Falls-level waterfall of challenges,” Foreman said. “There will not be enough production capacity in Vietnam, Mexico or India for all the production that will be moving out of China.

“Finally, what’s to say that China is the target this year, but Trump sits down with President Xi, and they have a really good time with each other?” Foreman added, referring to Xi Jinping, the leader of China.

Trump could quickly move the target to Vietnam or India, he said. “You risk a lot more by upsetting a smooth supply chain and production base than by trying to run from a moving target.”

Trump did not impose tariffs on toys during his first trade war with China. He planned to do so in December 2019, but the taxes were delayed and then suspended when the United States reached an agreement with China. But Trump did put tariffs on shoes, cribs, baby gates, bicycles and a huge array of other consumer products.

Foreman said it might be too late for his company to do anything about tariffs next year. He had just traveled to Los Angeles, where he welcomed toy buyers from companies like Walmart to the Basic Fun showroom and quoted them prices for the 2025 holiday season.

For 2025, Basic Fun is pinning its hopes on a toy line called the Littlest Pet Shop, a collection of tiny owls, ponies and puppies with oversized eyes and collectible accessories. The toys are made by a contract manufacturer in Guangdong province, in southern China. After years of issues with the pandemic supply chain, Foreman said, the company was finally having its best year ever.

“If next year we get hit with 60% tariffs, it could be our worst year ever,” he said.

Muskat of Deer Stags, a third-generation family business, said he was also not hopeful about moving his supply chain out of China. The company has sourced shoes from China since the 1980s, when many factories moved from Taiwan to the mainland.

When Muskat’s father and uncle started the business in 1964, the company first imported shoes from Spain and Italy, but rising costs pushed their sourcing to Brazil, then to Asia.

Deer Stags had looked into whether it could move production from China after being hit with tariffs during Trump’s first term. But at the price the company sells many of its shoes — under $50 a pair — there was just no alternative, Muskat said.

“It’s a nice idea on paper,” he said. “It’s not feasible in our business.”

This article originally appeared in The New York Times.

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