Footwear giants urge end to 'catastrophic' trade war

Top News | BLOOMBERG and REUTERS 22 May 2019

Nike, Adidas and other footwear giants have urged US President Donald Trump to reconsider his tariffs on shoes made in China, saying the policy would be "catastrophic for our consumers, our companies and the American economy as a whole."

In all, 173 companies signed an open letter to Trump, which was also sent to Treasury Secretary Steve Mnuchin, commerce chief Wilbur Ross and National Economic Council director Larry Kudlow.

"On behalf of our hundreds of millions of footwear consumers and hundreds of thousands of employees, we ask that you immediately stop this action to increase their tax burden," the group said. "Your proposal to add tariffs on all imports from China is asking the American consumer to foot the bill. It is time to bring this trade war to an end."

At the same time, President Xi Jinping's visit to a rare earths facility fueled speculation that the strategic materials could be weaponized in the trade conflict. Shares in JL Mag Rare-Earth Co surged after Xi stopped by the company in Jiangxi. The visit might have also flagged policy priorities. China raised tariffs to 25 percent from 10 percent on US imports, while the United States excluded rare earths from its own list of prospective tariffs.

And the US Department of Homeland Security warned US firms of the risks to company data from Chinese-made drones.

It said it has "strong concerns about any technology product that takes American data into the territory of an authoritarian state that permits its intelligence services to have unfettered access to that data or otherwise abuses that access."

China's SZ DJI Technology, the world's largest maker of consumer drones, said "the security of our technology has been independently verified by the US government and leading US businesses."

The trade tension between the United States and China has escalated as Trump threatens to impose tariffs as high as 25 percent on Chinese goods. Last week, the US Trade Representative's office released a list of about US$300 billion (HK$2.34 trillion) worth of products that could see higher import duties, including all types of footwear, from sneakers to sandals.

Trump is expected to discuss the tariffs with President Xi Jinping next month.

Trump has repeatedly stated that China would pay the tariffs - which his critics say is misleading or wrong. Earlier this month, Kudlow said that "both sides" will pay.

"As an industry that faces a US$3 billion duty bill every year, we can assure you that any increase in the cost of importing shoes has a direct impact on the American footwear consumer," the letter said.

The shoe industry's trade association, the Footwear Distributors and Retailers of America, estimates that the tariffs would cost US customers an additional US$7 billion per year. The companies said in their letter that those costs would disproportionately affect working class individuals.

The companies vary in their reliance on China. Nike, for example, made 26 percent of its apparel and 26 percent of its footwear in China in fiscal 2018.

Skechers makes around 65 percent of its goods in China, but not all of those products are imported to the United States. Under Armour, which also signed the letter, currently gets about 18 percent of its products from China - down from 46 percent in 2013. Its goal is to lower that number to just 7 percent by 2023.

The United States relies on China, the dominant global supplier, for about 80 percent of its rare earths imports.

Xi was accompanied on the trip to JL Mag by Liu He, the vice premier who has led the Chinese side in the trade talks.

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