U.S. President Donald Trump and China President Xi Jinping both got the trade deal they wanted, and it’s one that could have firms rethinking their sourcing and supply chain model.
The new deal puts China firmly back at the center of the production conversation, with the new tariff rate for footwear down to a range of 20 percent to 27 percent, depending on shoe classification and not including existing duties. That’s lower than the temporary reciprocal rate of 30 percent, and even lower than the original threat of a 55 percent duty rate.
“Anytime you could lower a tariff on goods that you’re importing in is a positive. So we’ll take it in this environment,” Matt Priest, president and CEO of the Footwear Distributors and Retailers of America (FDRA), said. “That creates some stability that I think will be important, and some predictability.”
While there are reports that the total tariff rate is between 45 percent and 47 percent, Priest said the 45 percent doesn’t apply to footwear. He calculated the “new rate” as 10 percent for fentanyl and 10 percent reciprocal for a total of 20 percent plus, for a handful of shoe [classifications] an additional 7.5 percent, bringing the total for new tariffs at between 20 percent to 27 percent.
The good news is that the rate creates a more parity with other nations because the additional tariffs are in line with what you would see in Vietnam, Cambodia or Indonesia, Priest noted. But the executive also pointed out that while it’s good that tariffs weren’t higher, for shoe companies who already pay higher duties, the situation is already challenging. “We’re on track to hit $5.75 billion in duties this year. That’s like a 70 percent or 78 percent increase in the duties paid in 2025. That’s historic.”
The shoe sector historically pays a total of $2.5 billion a year in duties, according to FDRA data.
“We see this deal as a positive first step toward a more stable period in U.S.–China relations. While we’re eager to hear more details and clarifications, any movements toward predictability and lower tariff rates helps U.S. companies get back on the path of making longer-term sourcing decisions with greater confidence,” Steve Lamar, president and CEO of the American Apparel & Footwear Association. “Of course, many questions still remain with other trade negotiations and programs, and we hope to see them resolved soon.”
One individual, who requested anonymity, said that China will likely benefit from the new lower rate. He explained that companies are likely to conclude that it’s easier to keep production in China, or move it back for production lines that had been moved out. That’s due to costs and timing in connection with logistics, receipt of deliveries and requirements to avoid transhipping penalties for production outside of China.
That was the position that Steve Madden Ltd. was in after moving production out of China earlier this year in anticipation of higher rates. CEO Edward Rosenfeld told Wall Street analysts in August that the company returned some work for fall back to China in cases where it would be difficult to ensure on-time delivery, product quality and/or unreasonable pricing in an alternative country.
“Retailers and importers now have some breathing room for their sourcing decisions,” Rick Helfenbein, former chairman, president and CEO of the American Apparel & Footwear Association and now independent consultant, said of the new U.S.-China trade agreement. “Expect sourcing focus will shift to the percent of raw material content in products that are made outside of China to avoid the concept of transhipments.”
Helfenbein said the next focus will be on Brazil and India to see if those tariffs are reduced. There’s already an expectation that a trade deal with Brazil could be forthcoming, given that Trump and Brazilian president Luiz Inácio Lula da Silva are talking again. Moreover, one person with familiarity of negotiations between the two parties confirmed to Footwear News that trade experts from both sides have been engaged in ongoing talks.
There’s no word yet on when the lowered rates for China would start, although the expectation is that an agreement could be signed soon.
