10 Nov Sneakernomics: The Election’s Potential Impact on Footwear Sales
Donald Trump shocked the world on Tuesday night with his presidential win. His victory could have deep implications for the sports industry, and the footwear market in particular.
In Trump’s nomination acceptance speech at the Republican National Convention (RNC) in Cleveland last summer, trade was a prominent topic. While the GOP has traditionally been a party to support free trade and international trade deals, Trump’s position was for renegotiating the terms of key deals, and he widely supported tougher trade terms with China – the nation’s top sourcing market. China maintains its position as the largest supplier of footwear in the U.S., accounting for 66 percent of imports in 2014, according to the United States International Trade Commission (ITC). Any change between U.S. and China trade relations is likely to impact the footwear industry.
In particular, Trump indicated that he would eliminate multinational trade deals, specifically the Trans-Pacific Partnership (TPP), which involves the U.S. and 11 other countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). Hillary Clinton, while she once favored this deal, later came to oppose it as well.
The Obama Administration argues that TPP is meant to strengthen our relationship with the Asia-Pacific region and make it easier for American manufacturing and agricultural businesses, both big and small, to sell Made-In-America products abroad, by eliminating more than 18,000 taxes and other trade barriers on American products across the TPP countries (ustr.gov). According to the Footwear Distributors and Retailers of America (FDRA), TPP would “[provide] half a billion dollars in savings for footwear consumers and companies the first year of implementation and six billion dollars over the first decade.” These savings, says the organization, “will help facilitate 21st century innovation and job creation” in the industry.
If the tariffs are eliminated or reduced under TPP, this increases the likelihood that footwear costs would be lowered and therefore retail prices could go down without sacrificing margin. Brands and retailers would sell more shoes and consumers would get a better deal. By keeping tariffs in place, however, it’s likely that prices would stay high and consumers may be more inclined to purchase fewer shoes.
Looking at U.S. footwear imports and exports, a key country on the TPP list is Vietnam. In 2014, U.S. footwear imports rose by $1.2 billion, or 5 percent, and most of this growth ($694 million) stemmed from low-cost imports from Vietnam, which grew at China’s expense, according to the ITC. Vietnam was also the #2 U.S. export destination for footwear in 2014, accounting for 10 percent of U.S. footwear exports and growing by 44 percent compared to the prior year.
Canada is another influential country on the TPP list, and the point of view Trump put forth about NAFTA during the RNC, saying that he would renegotiate that deal, could have an impact here as well. Canada was the top U.S. footwear export destination in 2014, accounting for 17 percent of U.S. footwear exports and growing by 9 percent compared to the prior year. Trade policy changes between the U.S. and Canada could potentially have an impact on the footwear industry.
While we don’t know how the international trade story will unfold, nevertheless it’s important for brands and manufacturers, in the footwear space and beyond, to begin to think about the various scenarios and implications the election may have on their businesses.
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