Why consumers may not see higher clothing costs from tariffs right away
As a trade war with China heats up, many brands and small businesses are considering the effect tariffs may have on their products.
Many apparel brands are especially exposed to higher costs from tariffs after President Trump placed a 145% tariff rate on imports from China, which is the world's largest exporter of textiles. According to an estimate by the Yale Budget Lab, the cost of imported leather belts and handbags could rise by 86%, while clothing prices could rise by 64%.
However, according to Olajuwon Ajanaku and Earl Cooper, the co-founders of golf attire company Eastside Golf, consumers might not see higher prices until the second half of this year. Based on some modeling in their business, Ajanaku and Cooper found some ways to offset the cost of the tariffs, though Ajanaku noted that consumers would likely see 'some slight increases across the board' by the fourth quarter.
'Right now, when you think about fall, all that stuff is pretty much price-locked,' Ajanaku said on Yahoo Finance's Financial Freestyle podcast (see video above or listen below). 'So you're not going to see it immediately right now because most of the goods are already here domestically, sitting at our warehouse waiting to be shipped.'
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Ajanaku and Cooper said they have been discussing how they're going to adjust their prices and profit margins to prepare for the oncoming tariffs.
'It's a constant conversation of diversifying factories and understanding [that] a lot of goods come out of China, but can you go to other countries like Peru? Are there opportunities in Europe? India?' Cooper said, noting they're also considering some domestic manufacturers to prepare.
But diversifying manufacturers isn't an option for every product, and President Trump has raised tariffs on many trading partners, making it difficult to find low-cost alternatives. As a result, margins throughout a product's supply chain will be affected.
Read more: What Trump's tariffs mean for the economy and your wallet
'When you sell something for wholesale, our approach is that everyone's going to take a little hit here,' Cooper explained. 'We're going to ask the manufacturer and say, 'Hey, we're going to need you to make it for a little bit less.' Then we're going to need to maybe take up the price a little bit to protect the margins. And then the same thing when it comes to our wholesaler — they're going to have to take up the price a little bit.'
He added that they're 'mindful' to not push the entire cost increase onto consumers, as that could hurt sales.
Many consumers have started making major purchases before some of these tariff-induced price hikes go into effect, and economists expect consumer spending overall to slow as a reacceleration of inflation weighs on the average American's monthly budget.
'It's definitely a conversation with three different parties [manufacturers, wholesalers, and consumers] that all have their own different interests to make sure that we can continue to be successful.'
And it won't just be Eastside Golf seeing the impact of these tariffs — with so many of the US's largest importers being targeted, it's going to hit many apparel brands in the coming months.
'It's affecting every apparel brand,' Ajanaku said. 'It's not just one apparel brand that's ... affected.'
Every Monday, Financial Freestyle host Ross Mac talks with key guests to discuss their wealth-building journeys and what it takes to build a lasting financial footprint. You can find more episodes on our video hub or watch on your preferred streaming service.
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