Fight the Power
FDRA’s Andy Polk and Andy Gilbert on why the powers that be need to know how bad this trade war is for the industry and consumers.
When tariffs on Chinese-made goods stood at a paralyzing 145 percent, Andy Polk, senior vice president of Footwear Distributors & Retailers of America (FDRA), ranked the scale of industry disruption and negative fallout at 12 on a scale of one to 10. The impact was potentially catastrophic in terms of company closures. Currently slashed to 30 percent, he ranks it at nine. For perspective, he ranked Covid’s fallout at nine.
“We could figure out ways to cut costs and develop operational efficiencies if tariffs were at 10 percent. Twenty percent gets harder. Thirty percent is still a breaking point is for small business,” Polk says, noting that shipments can begin again, but it means companies are going to import less and retailers will have less capital to buy, so there still may be product shortages as operating costs also spike across the board. “It’s a perilous business environment where companies must not take shortcuts but also must find ways to reduce costs.” He adds, “There isn’t a way through this for a lot of companies. Some will fold.”
Andy Gilbert, longtime industry executive and head of FDRA’s recently launched Footwear Innovation Foundation, agrees that many small- and medium-sized companies will struggle to survive. He notes that many factories operate month-to-month, and when cash flow seizes, they can’t pay suppliers. “Then they have to furlough employees. Sample rooms get impacted and innovation gets curtailed,” he says. “Companies will be cutting expenses across the board—travel, product, marketing—all aspects that frankly just aren’t good for business.”
In addition to trimming costs and searching for new sourcing partners, Polk and Gilbert urge everyone to let their congressmen know that this trade war is leading to less quality, fewer shoes, higher prices, and no meaningful creation of footwear manufacturing jobs in the U.S. “Communicating their pain to Congress to put pressure on the president is a must,” Polk says. “Communicating what’s happening to their business to customers is also a must, explaining their commitment to value and doing all they can to avoid price increases but that they’re up against what’s essentially a record high government tax.”
As for anyone who thinks shoe manufacturing will return to the U.S. at a meaningful level, Gilbert says the math doesn’t add up. Currently, the U.S. makes about 25 million of the 2.5 billion pairs it consumes annually. “We’re never going to come back to that extent,” he says. “Also, there’s no one or a combination of countries, in a relatively short period of time, where we could move all that production.” And while the industry has made great progress in diversifying its sourcing regions—90 percent from China down to 58 percent over the past 15 years—the amount illustrates everything China provides from an infrastructure standpoint. “It’s not a snap your finger type of solution. It’s going to take time,” Gilbert says.
It’s why FDRA has been crunching numbers to look for ways around the various tariffs—like making uppers in China and assembling shoes in Vietnam. “But when you introduce those complexities into the supply chain, you’re not saving money,” Polk says, adding that tariffs potentially raised elsewhere can throw a wrench into those best-laid plans.
Polk expects consumers will start to notice come August when inventories might be scarce and prices are likely higher. “A lot of goods were frontloaded, and inventories are decent now, but now there’s a scramble among all industries to get goods shipped during this pause,” he says. “Our industry is fighting Apple, Home Depot, etc. to get goods onto ships.” It’s why Polk bought back-to-school shoes for his three kids last month.
It’s also why Gilbert has a feeling of dread for many small- to medium-sized businesses. “To see those families get emotional about potentially losing third- and fourth-generation businesses is just gut-wrenching,” he says. “The president can be cavalier about the impact, but this is hurting people who helped elect him.” It’s also why Gilbert is concerned about the upheaval in broader geopolitical issues. “Long-term, we’re going to need friends and allies.”
In the meantime, the industry must find ways to survive. Attending trade shows is key, Polk and Gilbert say. “A crisis can be the best time to be in front of customers because when you’re together you can learn an awful lot,” Gilbert says. Polk advises to be proactive. “Focus on what you can do and can control to build a better sphere around your business,” he says, admitting, though, that’s especially hard to do right now. “We should be focused on making innovative, cool shoes that consumers will love. Instead, the government, in essence, is determining what’s being made based on tariffs, and that’s a sad state to be in.”
Man with a Plan
Twisted X Global Brands CEO Prasad Reddy on staying a step ahead of the chaos.
With China’s tariff rate currently lowered to 30 percent, Prasad Reddy says it provides relief—but not enough. That’s because footwear already has “very high” duty rates and with that tariff added, it becomes a major issue that importers must navigate. Think price increases, major supply chain disruption, and a scramble for new sourcing regions. A perfect storm.
Reddy, who possesses 50-plus years of footwear sourcing experience, has done the math, and it simply costs too much to source goods in China under these conditions long-term. Generally, he notes, most casual shoes duties are around 10 percent. Factor in that, in 2019, there was an additional 7.5 percent duty placed on product from China, so when added all together that’s 17.5 percent for casual shoes on top of the 30 percent tariff. “It really adds up,” he says. “Almost every company is in turmoil trying to decide what to do because there’s so much uncertainty. And we don’t know what’s going to happen after the 90-day pause periods, so a lot of planning is required to address the various potential outcomes.”
Reddy says this situation is constantly evolving, so plans continue to change. For now, TXGB is actively implementing solutions to diversify and source products and materials from lower tariff countries. “We’re limiting our exposure to Southeast Asia and expanding into other Asian countries as well as Mexico,” he says. “We’ve been able to utilize relationships from my many years in the industry to develop new partnerships. In the long run, this will make us a better company.”
Here, Reddy discusses TXGB’s trade war strategy, the fallout that has occurred already and what might happen if it rages on, and the industry’s silver lining that he hopes shines through again.
How much damage has already been caused? A lot because when tariff were 145 percent practically no product was shipped from China for about six to eight weeks. And 30 percent is still high plus there are concerns about the availability of shipping containers. That will impact the back-to-school and fall season. Fortunately, like during the pandemic, we had the financial ability to take extra inventory amidst the threat of tariffs. We increased our inventory to be at a six-to-eight-month supply instead of our normal two to four months level. That puts us in a good position. Companies that didn’t have the financial strength to do that might not be able to survive without shipments.
So product shortages and higher prices possibly come fall? Yes, because financially strong retailers are taking all the inventory they can get before expected price increases. Whatever the tariff rates are, wholesalers will likely pass some of that cost increase on, which could then result in a drop in consumer demand if retailers pass some of that cost increase on. We’ve worked hard to keep prices steady for our retailers and hardworking customers, but at the current rate of tariffs we’ll raise our wholesale prices by an average of less than nine percent beginning this month. We’re able to absorb most, but not all of it. As always, we remain focused on fairness, value, and doing right by the people who support us. For the industry, I expect the second half of the year will likely be down for many reasons. Price increases will have a big impact, and inflation will put a strain on consumers’ finances, which is going to impact us all.
On a scale of one to 10, how would you rank the current level of industry turmoil? Eight. However, there may be differing levels of turmoil depending on where companies are sourcing. If you’re heavily sourcing from Mexico, your level may be a three to five. If you’re sourcing from Southeast Asia, which is where most do, it’s six to 10 depending on the country.
How does this overall turmoil compare to the pandemic? This current state of chaos has a lot more uncertainty, and when you’re running a company, you don’t like uncertainty. The difference with the pandemic was that we knew things would eventually get back to normal, so there was less panic. We were also more in control of ourselves, whereas in this current state of chaos there’s a lot more out of our control. For example, we still had product coming during the pandemic. With these tariffs, the product wasn’t flowing for weeks from China, and it’s been delayed elsewhere. Quite a few factories will be in financial trouble if this situation continues. I worry that there could be many closures, which may also affect product availability. In addition, many smaller- and medium-size companies could go out of business because they won’t have the experience, financial capabilities, and infrastructure to handle this chaos. And most companies that do survive may not be profitable this year with everything going on.
What does your personal crystal ball tell you happens when the pauses expire? I don’t believe the administration will be able to make deals with all Southeast Asian countries by then. Maybe two or three of them. So a choice must be made: extend the pause for another three to six months or go with the rates already established. It’s hard to predict which way it’ll go.
Any advice on how to keep calm and soldier on amid such chaos? Planning is essential. We just try to plan for anything and everything, so we have plans A, B, and C at all times. We must also be proactive and not hide our heads in the sand. Keep planning and building to do whatever it takes to survive. Panicking won’t get us anywhere. It’s important to stay calm, as it’s just as important to be prepared to move fast based on the current circumstances.
Any silver lining? Our industry has gone through lots of change and chaos in my 50-plus years of experience, but we’ve always survived because we learned from it and adapted. I think this too shall pass. Challenging times also offer opportunities to build smarter, stronger, and more resilient partnerships. Thus, we remain optimistic about the road ahead and are committed to getting through it together. And unlike publicly traded companies that must watch their financials extra closely, TXGB has a little more flexibility in making hard decisions. We don’t mind being a contrarian if it feels like the right thing to do. We didn’t stop production during this time, just as we didn’t during Covid.
Speaking Up for the Little Guys
Dallas Market Center CEO Cindy Morris on why the organizers of WESA and other fashion trade events launched an anti–tariff initiative in support of independent retailers.
The way Dallas Market Center sees it, this trade war is hurting the little guys most. That’s why it introduced “Stand With Main Street: Turn Off the Tariffs” initiative early last month. Its core message of advocating for a 90-day pause on all tariffs between the U.S. and China was at least partially heard, but there’s still work to be done.
“Even if tariffs are lowered further, the supply chain consequences are highly disrupted,” says CEO Cindy Morris. “We need an immediate pause on all tariffs, then trade representatives can create a reasonable policy over the coming months.” Politics, she adds, has nothing to do with its position. “Tariffs disrupting the flow of goods to retailers during their most critical (holiday) selling season is destructive. Our position is not anti-tariffs in all situations, just at this moment given the vulnerability of retailers and the U.S. economy.”
Here, the exec sounds off on the trade war’s near- and potential long-term impact on independent retailers.
On a scale of one to 10, how would you rank the current level of retail industry turmoil? Every day leads us closer to a crisis, especially for Main Street retailers depending upon new collections or seasonal goods for the fourth quarter. It’s a fluid situation, but it’s a seven.
How does the current state of chaos compare to the pandemic? Some of our exhibitors are calling it Covid 2.0, but others are calling it worse. Product for the critical holiday season must be on the water within weeks. The danger is that production, shipping, and the U.S. ports get so backed up that product arrives later or never.
How is Dallas Market Center’s anti-tariff initiative designed to help? Main Street retailers don’t have a strong, united voice, especially compared with large industries with a few massive players like car and cellphone makers. It’s up to each of us to help unify and amplify their voices to save fourth quarter sales. Our petition is one way to help. We have three goals. First is awareness. Retailers need to understand the severity of the situation. Second is planning. Retailers need to take stock (literally) and evaluate how they need to adjust. Third is communication. Retailers need to be closely communicating with the brands they stock and seeking new brands to fill in inventory.
How’s the response been? Tremendous. Thousands have signed the petition. The feedback has been overwhelmingly positive. We’re trying to ensure that customers understand that our communication is not political, it’s practical. We want the free flow of goods for the holiday sales season.
What else is Dallas Market Center doing to navigate this turmoil? During our Total Home & Gift Market this month, we’re holding a tariffs and trade breakfast event featuring Jonathan Gold, vice president of Supply Chain and Customs with the National Retail Federation. He’ll be joined by manufacturers to discuss what’s happening and how to plan. We’re also holding virtual roundtable and in-person seminars at upcoming shows featuring leading independent retailers discussing how they’re adapting. In addition, our Retail Development team is available to answer any questions, and we created a newsletter covering the latest tariffs and trade news. Our mission is simple: bring buyers and sellers together and help support the free flow of goods to retailers. When something gets in that way of that, we have no choice but to speak out.
What happens if this trade war continues or intensifies? Short-term, retailers must receive product, or their fourth quarters will suffer. It could cause retailers and vulnerable manufacturers to close. Mid-term consequences include the disruption of product collections over the next year. Manufacturers may hold back new collections, and retailers may face shortages and extremely limited product options. Long-term consequences are perhaps the most concerning. During Covid, we saw many entrepreneurs go into business. Retail formation statistics soared and have stayed strong since. If tariffs aren’t resolved quickly and in a manner that supports Main Street retailers, I fear that entrepreneurs will pull back and we’ll see a retreat in new store launches. That may take years of recovery.
Proactive Pivots
Josh Higgins, president of ING Source, makers of OS1st compression sleeves and hosiery, on moving fast while staying focused.
ING Source recently sent a letter stating that it would not raise prices on it OS1st brand, which is sold exclusively to independent retailers. President Josh Higgins wanted to assure partners that at a time when they needed help the most, the North Carolina-based company would absorb any cost increases. Meanwhile, ING Source continues to move fast on several fronts amid this trade war.
“We’re working very closely with our manufacturing partners to manage pricing, optimize our supply chain, and ensure stable inventory levels,” Higgins says. “Additionally, we’ve proactively increased inventory and secured additional raw materials to give us a cushion during this uncertainty. We’ve also shifted our demand generation strategy with simple pivots like updating our website’s front page to emphasize our in-store availability via Locally, which drives sell-through at retail.”
Here, Higgins offers his take on the trade war and other recent disruptions, and how ING Source is responding.
On a scale of one to 10, how would you rank the current level of overall industry turmoil? I’d place it at a four as of 3:43 p.m. May 12, 2025. (The date China tariffs were reduced to 30 percent for 90 days.) There’s a sense of underlying tension, but it hasn’t boiled over just yet. Every company is unique, but from what I’ve heard, the situation remains manageable. However, we’re still facing a looming risk of tariff negotiations stalling or taking a turn for the worse. Any change could make that number jump significantly.
How does the current state of chaos compare to the fallout from the pandemic? This doesn’t compare. Back then, stores were closed, production was halted, and everything was uncertain. While there’s disruption and uncertainty now, stores are still open, product is still moving, and consumers are still buying. It’s more of a logistical and pricing challenge than a total shutdown. In 2020, we faced existential questions. Now, it’s more about adapting and recalibrating. Since then, we’ve also become more resilient, smarter with supply chain strategies, and more agile in operations. Many brands, like ours, have diversified production and built-up inventory buffers. We’re better prepared, even if the challenges are different.
Where are your products currently made? We’re 70 percent Taiwan, 20 percent U.S., and 10 percent China. You’ll see more products made in the U.S. very quickly. We have also moved several of our products to Vietnam from China.
What does your crystal ball tell you happens when these tariff pauses expire? We don’t have a crystal ball, which is why we chose to make our own certainty with a price freeze. Using the conditions and knowledge we have today, my gut tells me we will remain in a holding pattern. A full resolution feels unlikely by that date, and I expect tariffs to remain in place at current levels. So the immediate plan is to maintain our pricing and current sales structure. Thanks to our current inventory position and proactive planning, we have the flexibility to take a measured approach. That gives us time to work with our partners on a long-term strategy without disrupting day-to-day operations.
Even so, a lot of disruption has already occurred, right? Even if tariffs are lifted, the disruptions in shipping and supply chains won’t be resolved overnight. Many suppliers have adjusted their production flows, rerouted logistics, or delayed orders in response to the uncertainty. Returning to “normal” will take time because reactivating and realigning global supply networks is a multi-step process. Realistically, it could take three to six months to fully normalize operations. It depends on how quickly policy decisions are made, how suppliers respond, and how shipping lanes stabilize. Once the rhythm of global trade is disrupted, it takes time to rebuild predictability and efficiency.
How are disruptions like DOGE, upending long-term alliances, and reversing sustainability efforts impacting ING Source? These disruptions create a more volatile and fragmented global landscape, which impacts everything from raw material sourcing to regulatory compliance. Sustainability, once a clear focus, now faces challenges as cost and supply concerns take precedence for some companies. Prior to these shifts, for our small business on-ramping sustainability initiatives was an important but albeit slow scaling process. Now, we remain committed to sustainable practices but recognize the need to balance them with economic and operational realities. It means we might look for progress in different areas that are more under our control. Overall, we’re leaning into our strengths: agility, partnership, and innovation. That means deepening relationships with reliable suppliers, diversifying our sourcing footprint, and investing in smarter inventory and forecasting systems. We also continue to prioritize transparency with our retail partners and customers to build trust in uncertain times.
Any advice on how to keep calm amid all the turmoil? I stay grounded by focusing on what we can control—team communication, clear planning, and flexible decision-making. Disruption is part of modern business, but perspective matters. We’ve weathered major storms before. My advice: Keep your team close, stay focused on your values, and don’t make decisions out of fear. Steady leadership makes the biggest difference when things feel uncertain.
The Bad News Bares Reckoning
Impo Intl. CRO Bruce Kaplan pitches actionable advice to hit back at a devastating trade war.
Bruce Kaplan has been around the industry block a few times over the course of 46 years. He’s weathered plenty of challenges and calamities, having started out in retail and then crossing into wholesale with stops at HH Brown, Ecco, Ariat, Phoenix Footwear Group, Ara, and now Impo. Over the years, he’s become a Mr. Fix It for fellow shoe executives. So when he says this trade war, left unresolved, has potential catastrophic consequences, take heed.
“The financial impact will be bad. People will lose jobs, and some companies will shutter. It’s that dire,” Kaplan says, noting that the speed of failure is directly related to where products are made. The more reliant on China, the more at risk companies are. Even companies not importing from China will see fallout. “It will simply take longer. There’s literally nobody that’ll be immune,” he says.
That said, the reduction to 30 percent on Chinese-made goods and 90-day pause is a bit of a breather. “Now the industry is navigating degrees of financial strain,” Kaplan says. “At the very least, we should start seeing cargo movement. That by itself will help.” But those benefits are dampened by the damage already done and the lingering uncertainty of how this trade war evolves. “Those struggling to release goods continue to face challenges, and this 90-day retreat impacts consumer confidence” he says. “We’re likely in the second inning of a long game, potentially one that goes into extra innings.”
Companies most likely to survive this crisis essentially fall into three categories, according to Kaplan. 1. Some simply cannot withstand the financial burden and will either shut down or restructure aggressively through deep cost-cutting and then augment potential losses through significant price increases. 2. Those with moderate diversification and available cash can absorb the new tariff rates but may need to modify their structure or raise prices (already happening) to stay afloat. 3. Fully global and diversified companies with healthy margins will experience some pain but should remain operationally stable if negotiations resolve favorably.
Regardless of where one might fall, Kaplan recommends the first step is for company leaders to push harder to present their case to this administration and general public. “My biggest frustration is the widespread lack of understanding about what’s coming,” he says, noting that consumers don’t yet fully grasp who ultimately bears the cost of tariffs. “Otherwise, there’d already be more outrage. This issue extends far beyond $8 eggs. We should start using the term ‘profit’ instead of ‘margin,’ as that feels too much like a business term.”
Of course, there is no single solution out of this mess. Kaplan recommends creating a list of five to 10 measurable ideas to develop and implement. Above all, it’s about forging a new path. “Start with a comprehensive process review, and ensure you have a strong team to support you in seeing it through,” he says. “Focus on generating ideas that enable you to put your best foot forward, then create an action plan that is both clear and ambitious.” It requires bravery, resilience, and decisive action, he adds. “I’d triangulate between the factory and key customers to determine how much each can contribute to ensure the most successful season possible. At its core, this is about fostering true partnerships.” Kaplan adds, “To quote Tom Peters: ‘Have a bias toward action.’”
More advice: reinvent, refine, and execute. “Start by taking an honest look in the mirror and acknowledge that you can’t solve these issues alone,” Kaplan says. “Collaboration with your team is crucial. Devote a day a week to discuss potential outcomes. If you work well together, your chances of survival increase significantly.” On that note, he advises to share all ideas openly with retail partners. Without clear communication, they might create their own narrative. “Ultimately, every retailer has a unique business model, which means tailored, individualized plans are needed for each customer,” Kaplan says. “Beginning with this approach will pave the way for solutions to emerge naturally.”
Be authentic and fair, as well. Kaplan advises to honestly communicate that you’ve done everything possible to help customers grow their businesses. It requires being completely transparent about the current situation and what the future may look like, warts and all. “Share comparable items along with the updated costs to give retailers a clear understanding of the impact—both on retail pricing and on their top- and bottom-line sales,” he says. “Additionally, remember that we’re all in this together. Many of your customers are facing similar challenges, so showing empathy toward your buyers and decision-makers is crucial.”
Last but not least, Kaplan advises to keep the faith. A positive attitude and proactive approach can do wonders. This too shall pass, he believes. “The hope is that as an industry, I believe we have, as many times before, overcome significant challenges by working together to find solutions,” he says.
Of course, such faith is being tested of late. “The toughest thing for me is trying to explain to friends outside of the industry who truly see this trade war as a good thing,” Kaplan says. “I’m more than willing to listen to other points of view, but it’s much more difficult when you see the direct impact this is having on so many friends and colleagues.”
Manufactured Madness
Marina Rosin Levine, CEO Highline United, makers of Ash and Sanctuary, on why this crisis is worse than Covid.
The pandemic, while extremely disruptive, isn’t as chaotic as this trade war, says Highline United CEO Marina Rosin Levine. Not only are the tariffs random and fluctuating wildly, but there are also no government bailouts to help companies get through the crisis. Worst of all, she says it’s self-inflicted and didn’t have to happen.
“This tariff pandemic is manufactured by this administration, not a lab,” Levine says. “America was the greatest center of free trade, thus our powerful stock market. If moving goods is easier in and out of Italy, then why pay the high cost of living here! Who knew that Italy, or frankly any other country in the world, would be more pro-business than the U.S.!”
Levine ranks the current level of industry turmoil at eight, down two points when tariffs were at 145 percent. Still, the volatility and zero uniformity in tariff policies makes planning business next to impossible. “Under the Trump tariff wars, we don’t know what tomorrow brings,” she says. “The president is using countries’ businesses as bargaining chips to get results that tend to contradict one on another.” For example, she cites footwear having a 90- to 120-day lead time for production, plus it being a narrow margin business. “How can we possibly operate a business when our margins fluctuate every 90 days and half the time into the direction of negative margin, especially on low-cost, high-volume product that immediately impacts lower income consumers?”
Highline United isn’t banking on normalcy to return any time soon. It’s adapting on the fly. That includes holding some China-produced product at its factory, exploring production in Brazil and Spain, layoffs, and raising some prices. In addition, Levine pulled Fall/Holiday ’24 sale and clearance items off Ash’s DTC site to convert into fall inventory. “We’re also starting to move Ash production out of China,” she says, noting that 50 percent of Highline United production is in China. The other 50 percent is mostly Vietnam with some in Cambodia. Levine is “excited” about potential partnerships in Brazil and Spain. If tariffs rise again, Highline United will lean further into those countries.
All plans are subject to change. Levine says it’s like living in no man’s land. Fortunately, Highline United is factory-owned. Any orders that may have been put on pause, particularly in its speed-to-market facility, can be ramp up quickly. “Footwear people are agile, and if Trump cancels tariffs, we’ll find our way back to normal pretty fast,” she expects. “If this is settled soon, Spring ’26 should almost be back to normal.”
In the meantime, the turmoil is taking a mental toll on lots of industry people, including Levine. She’s been sick multiple times, and it correlates to recent stress. “This isn’t sustainable. I feel the administration has hijacked the Silicon Valley word ‘disruptor,’ which meant innovation and investment, to create chaos and unrest,” she says, noting that a small business founder recently half joked that their company is so devastated that she’s more valuable to their family as life insurance than an income producer.
It’s Levine’s duty to keep calm while speaking out. “I’ve always been politically active, so knowing people have power helps me keep going,” she says. “Most importantly, our close-knit team at Highline United and our factory partners enables us to really lean in on each other to get through this. I’m very thankful for their support and partnership.”
Fast Times
Jason Brooks, CEO of Rocky Brands, on keeping pace amid an unpredictable and rapidly changing landscape.
Rocky Brands is 93 years young and has survived plenty of turmoil over those decades. The key, says CEO Jason Brooks, is to stay focused on what you can control and execute on that. As for what you can’t control, “just get over it because you can’t do crap about it, so why waste your time on that.”
Of course, it’s not that simple when it comes to Rocky Brands’ navigation of this trade war. It involves a talented team that has built strong relationships with sourcing and materials partners worldwide that date back years. Everyone is working together to spread the fallout to manageable levels. “We’re all in the same boat trying to help each other,” Brooks says. “Factories, raw material partners, ourselves are all eating a little bit of the costs.” But with tariffs at least 10 percent higher worldwide, he says its consumers are also absorbing costs—to the tune of about a six percent higher prices starting in June.
Here, Brooks candidly discusses on how the trade war and other recent turmoil has upended the industry. Rocky Brands is doing its best to pivot. For example, the Ohio-based company expects to shift more than half of its sourcing out of China by year’s end. Fast times, indeed.
How are you sleeping these days? Not well. I spend a lot of time thinking it all over. But it feels like it’s been that way since the pandemic and the uncertainties that followed. Fortunately, we have a great team, and we’ve put great plans in place. Of course, we’ve had to change them a few times of late, but we continue to come in every day and react to any changes and try to manage what we can control. Things that are out of our control, we need to understand and deal with them, but they’re out of our control. I also go back to my dad who always advised to treat our partners around the world as best we can so if a time comes for any help, they’re likely to do so.
On a disruption scale of one to 10, where does this trade war rank? Lowering it to 30 percent is positive, but it’s still causing a lot of turmoil. And while the media was reporting that it was 145 percent, we’ve been paying tariffs already issued during Trump’s first term. Actually, our tariffs peaked at 197 percent for a while. So I’d rank it around an eight.
And the fallout from the pandemic ranked? Oh, my God, higher. There was so much unknown versus a trade war. There have been trade wars forever. Granted, this one is a little crazier, but the pandemic seemed really insane to me.
But there is no bailout this time. The stimulant payments then were huge. We were also very fortunate to be considered an essential business as a maker of work boots. So we didn’t have to shut down the way some other companies did. A wildcard now is potential tax cuts and rebates that could give average Americans a cash infusion of sorts. If that happens in the next few months, then what? Right now, though, we don’t know if there’s any help coming.
So what is Rocky Brands doing to react? Actually, the administration doing what it did, in the time frame it did, absolutely made us move quicker. If they’d have said we had another six to eight months to manage our business sourced out of China…I probably would’ve taken all that time. This made us move quicker, because we had to. So we’re going to be at a very different place at the end of this year where probably 20 percent of our product will be sourced out of China, and of that amount probably half will be shipped to the UK, Australia, etc. and not impacted by tariffs. Last year, we were 45 to 50 percent out of China.
Where are you moving it to? Definitely some more in our factories in the Dominican Republic and Puerto Rico. We’ve had factory bases there for almost 40 years. All that time it was tariff-free, but now it’s 10 percent. We can deal with that, but it’s still 10 percent. We’ve also moved sourcing into Vietnam, Cambodia, Myanmar, India, and a little out of Mexico. And anywhere else we can find. Fortunately, our Chinese factory partners have already started the process of building operations elsewhere. We’ve been doing business with some of them for 25 years. We trust you, you trust us, so let’s keep working together. Now is it that simple? No. It’s complicated, but much better than starting from scratch.
What about moving production to the U.S.? If we wanted to start a shoe factory in the U.S. today, it’d be a minimum of 12 months—and that would be if everything went perfect. There are factories here already, and those will produce more in the U.S. going forward. But I don’t foresee this massive influx of footwear factories happening here. Finding workers, for starters, would be very difficult. We already struggle to staff the BBQ restaurant inside our outlet store as well as our warehouse. So even at $25 an hour to work in a shoe factory…I don’t think enough people will do that.
What does your crystal ball tell you happens next? Who knows, but I’ve got to believe that those negations will go ok. That said, maybe other countries don’t go back to 45 percent but what if it goes up to 25 percent?
How is a lot of other recent turmoil impacting Rocky Brands? Our military contract business slowed down at the end of last year and it’s carried over into this year. Obviously, there have been some defense spending cuts, and procurement cards seem to be on pause as well. So we’re seeing some slowdown in sales as a result. It’s a small, important percentage of our business, but it’s not freaking me out. What I can’t figure out is that the economy doesn’t seem to be slowing down. From what I see, restaurants, airports, highways, hotels, etc. are busy. People are out spending money. That chainsaw cut everywhere, and reports state consumer confidence is waning, but I don’t see it yet. The consumer doesn’t seem to be that worried.
Still, can a lot of smaller wholesalers survive 30 percent tariffs for long? No. There’s a segment of brands that have launched over the last few years basically on social media and use their garages as warehouses. Up until now, you could run search on Google and find a manufacturer in China to make just about anything. But those companies likely don’t have the resources to find sourcing in Vietnam, for example. A lot of those brands will be gone if this trade war isn’t settled.
Answering the Call – Again
Shawn Osborne, president of Two Ten Footwear Foundation, on how the industry charity is assisting in another time of heightened need.
The fallout of this trade war, if left unresolved at current tariff levels, could result in thousands of industry members losing their jobs across retail and wholesale. The phones at Two Ten seeking immediate financial relief are expected to be ringing loudly and often. The Boston-based organization will do its best to help fellow shoepeople in need—just like it has for 86 years and counting.
First off, Two Ten President Shawn Osborne wants the industry to know: “You are not alone. Two Ten will be here to bring hope and opportunity, no matter what happens.”
As it pertains to this crisis, Osborne says Two Ten is focused on personal hardship relief and counseling services. So the second thing he wants the industry to know is that, for those who can, please give. Financial donations are the most immediate and effective form of assistance. It’s particularly important amid times when companies are making cuts. “There’s a feeling that philanthropy is discretionary in times like these; that somehow it’s not essential,” Osborne says. “But nonprofits that provide emergency response are never more critical than in these moments. The help Two Ten offers footwear families is essential.”
Fortunately, Two Ten has learned a lot since responding to the fallout from the pandemic—its greatest crisis to date. Particularly, it learned how to respond to urgent need amid a crisis. “We made a lot of process improvements because of the pandemic,” Osborne says. “We retooled our systems and streamlined procedures so our grant managers can respond more quickly.”
As far as how this crisis ranks, Osborne puts it at an eight on a scale of one to 10. But, he says, this and the pandemic are hard to compare. There were a lot of unknowns in the early days of Covid, and Two Ten was helping people who were sick or dying. That put it in a different category. “During the pandemic, we faced impacts immediately and knew this would be something we’d never seen before—and we this would be the longest crisis we ever faced,” Osborne says. “This feels different because of the delayed impacts and uncertain end.” On the bright side, he believes Two Ten, in many ways, is better prepared for this crisis. “We weren’t prepared for Covid, but Covid prepared us for this.”
Of course, a trade war isn’t the only disruption impacting the industry. The fallout of DOGE, for example, has a direct impact. Fewer jobs lead to fewer shoe purchases. At least, Two Ten doesn’t rely on government funding so it’s immune to that infamous cost-cutting chainsaw. In a word: Whew!
“Many charities that provide social services do receive government funding, and now they’re increasingly unable to meet the needs of the communities they serve,” Osborne says, noting food banks as an example. “Some of the organizations hit hardest by loss of government grants provide resources people rely on during economic downturns. That fraying safety net means Two Ten may be the only place some footwear families can turn. That’s concerning.”
Nevertheless, Two Ten will do its best to respond to all forms of turmoil impacting shoepeople. And while several companies saw record earnings in the last quarter, the industry is navigating plenty of uncertainty, including inflation fears and a concerning decline in consumer confidence. “We’re always working with our board to assess what they mean to footwear employees, and what impact they could have on Two Ten,” Osborne says. “Continuing to enhance and expand Two Ten’s relief, education, and community programs will help us continue to be relevant in a changing industry landscape.”
Above all, Osborne credits Two Ten’s board of directors for being the vital port in all storms. “Our board believes deeply in Two Ten’s mission—that we can’t hold back in moments like these and that we need to be there for our community,” he says. “They support the idea that the foundation needs to ‘meet the moment’ during a crisis, as well as how to come out of it stronger and remain focused on the long game.”
