Tariff Considerations and Global Production Shifts in the Shoe Industry
By Alan Miklofsky | November 18, 2024
The footwear industry has undergone significant changes in recent years, particularly as brands have adapted to fluctuating trade policies, including tariffs on imports from China. For many companies, diversifying manufacturing locations has been a strategic move to mitigate risks and maintain competitive pricing. This article explores the current state of footwear production, highlights statistics from major athletic brands, and evaluates the validity of common perspectives on tariff impacts.
The Role of China in Global Footwear Production
China remains a dominant player in the global footwear industry, producing 54.6% of the world’s shoes as of 2022. Despite this, the reliance on Chinese manufacturing has been decreasing for many branded footwear companies due to rising labor costs, trade tariffs, and geopolitical concerns.
Diversification of Manufacturing Locations
In response to tariffs and other trade uncertainties, many companies have shifted their production to alternative countries. Notable destinations include Vietnam, Indonesia, Cambodia, and the Philippines. These regions offer lower labor costs and favorable trade agreements, making them attractive options for large-scale manufacturing.
Production Statistics for Leading Athletic Brands
1. New Balance:
New Balance employs a diversified production strategy, manufacturing shoes in the United States, United Kingdom, Vietnam, Indonesia, and China.
This approach allows the company to cater to multiple markets and mitigate the risks associated with over-reliance on one region.
2. Hoka:
Approximately 80% of Hoka’s shoes are produced in China and Vietnam, with the remaining 20% manufactured in the Philippines, Cambodia, and the Dominican Republic.
3. On Running:
On Running’s production spans China, Vietnam, and Latvia.
The brand leverages these locations to maintain supply chain resilience and support its growing market share.
4. Brooks:
Brooks produces 55% of its footwear in Vietnam and 45% in China.
Vietnam's increasing role highlights its prominence as a key manufacturing hub for the athletic footwear industry.
Key Benefits of Diversification
Reduced Tariff Exposure: By manufacturing in countries with favorable trade agreements, companies avoid steep import duties.
Supply Chain Resilience: Spreading production across multiple countries ensures continuity in case of disruptions in one region.
Cost Efficiency: Lower labor costs in countries like Vietnam and Indonesia help brands remain competitive in the global market.
Understanding Tariff Risks
While diversification mitigates some risks, China’s significant share in global footwear manufacturing ensures that tariffs on Chinese imports still affect a portion of the industry. For example:
Smaller brands or those with a higher reliance on Chinese manufacturing may experience pricing pressures.
Tariff engineering—modifying product designs to fit into lower tariff categories—has become a common strategy for reducing costs.
Key Takeaways
China’s Role is Shifting but Crucial: China continues to play a major role in the footwear industry, but its dominance is gradually declining as brands diversify production.
Athletic Brands Lead in Diversification: Companies like New Balance, Hoka, On Running, and Brooks have strategically moved significant portions of their production to countries like Vietnam, Indonesia, and the Philippines.
Tariff Impacts Are Mitigated: Diversification reduces exposure to tariffs, but brands must remain vigilant about evolving trade policies and global market conditions.
Sources
Statista: "China's Share of Global Shoe Production"
That Running Thing: "Which Running Shoes Are Not Made in China?"
GQ: "Nike and Adidas Are Moving Production Out of China"
Marketplace: "The Chinese Manufacturers Behind U.S. Shoe Brands"
World Population Review: "Shoe Production by Country Statistics"
This article provides insights into how the footwear industry navigates tariffs and trade policies, offering valuable context for businesses and consumers alike.