Even 190% Tariffs Can't Shake US Shoemaker's Reliance On China

NDTV

11-07-2025

When an $80,000 tariff bill landed on her desk in May, Haley Pavone did what many small business owners might do: she froze hiring and added an online checkout fee to help cover the cost.
Pavone, founder of California-based Pashion Footwear, which imports shoes from China, hasn't moved production out of the country. Not because she hasn't tried, but because, like many, it wasn't a viable option.
Since President Donald Trump raised tariffs on Chinese goods after returning to office, Pavone has scouted factories in Brazil, India and Vietnam.
But she quickly ran into problems: they all required higher minimum orders, and staff lacked training, particularly to make her unique shoes that convert from flats to heels. Even if she could find companies with skilled workers, they'd still need to import key components from China.
A test run of a strappy heel from a factory in Vietnam proved to be "inelegant." So even as tariffs on some of her products peaked at a whopping 190% in April, she decided to stick with existing suppliers for now.
With US tariffs on Vietnam now close to the levels on China, there's even less impetus to shift production away from the world's second-largest economy.
"No one is as optimized as China," 29-year-old Pavone said. "Just the level of skill and implied knowledge in the workforce there for these different industries so dramatically exceeds what you'll find elsewhere."
Pavone's predicament is faced by companies globally that rely on US consumers and Chinese producers. Diversification from China since 2017 has largely been concentrated in textiles, electronics, autos and in assembly, yet even firms in those areas are often still largely relying on China-based firms for inputs, according to Rhodium Group.
"No country can replicate China's highly optimized production ecosystem at scale, so firms remain slow to relocate to alternative production hubs," analysts including Agatha Kratz wrote in the 2025 report.
Relocation is likely even lower than reported in headline data. When including the surge in de minimis shipments - or US imports that avoided duties if priced below $800 - and rerouting of Chinese goods through third countries, US dependence on China eased by a quarter less than thought, falling by 6 percentage points rather than 8 percentage points since 2017, according to new research from a team of academics from institutions including the World Bank and International Monetary Fund.
"China is replacing itself to a greater extent than either Mexico or Vietnam is replacing China in the US market," according to the researchers, led by economist Caroline Freund, Dean of the UC San Diego School of Global Policy and Strategy.
Recent trade data underscores the dynamic: China's exports to the US have plummeted while exports to Southeast Asia surged. Yet shipments from Southeast Asia to the US have also skyrocketed - often by record amounts - indicating that goods and parts from China are still very much in demand in the US.
The US and China finalized a trade "understanding" in late June, meaning Pavone and importers like her no longer face the most extreme tariffs. President Trump's April 2 Liberation Day levies had sparked a tit-for-tat battle that sent US charges on good from China to 145%, and to about 190% for some of Pashion Footwear's products that already faced pre-existing levies.
Yet there's still no clarity on where the final tariff level will land.
Pashion's shoes retail for around $200 a pair, with styles spanning a range of price points. The levies are eating into margins, but she says the business remains profitable for now.
For Pavone, it's tough to compare with facilities she's used for nearly a decade in Dongguan, China, a world headquarters for textile production. The required plastic, metal and fabric components she needs come in through a carefully calibrated supply chain and most inputs are nearby. Pavone can order in smaller batches to test new designs, meaning less financial risk.
And then there's the expertise. Yaqin Long, the owner of her supplier Lovejoy Studio is a second generation footwear maker. Half of the staff at the factory of about 2,000 where Pashion's shoes are made are engineers.
Long added a factory in Vietnam in 2014 and plans to build another in Indonesia to save on labor costs, but that will also take training, investment and time to get right. "US customers are pushing us to go abroad but it's hard to move production," Long said from her office in Dongguan.
For Pavone, shifting orders to Vietnam would require upfront costs of at least $50,000, she estimates. And it's still not clear what tariff levels she'll face in much of the world.
All of that means Pavone is still doing the math on the best path forward for her company, which began as a startup about six years ago and pitched on Shark Tank.
"It's just bad, it's very bad. I just don't know how I'm supposed to do my job," Pavone said. "It should have been a great year, and instead, it's going to be a year defined by if we stay alive or not."