FDRA, AAFA, NRF, RILA: U.S.-China Tariff Pause A Welcome Start, But More Needs To Be Done

Yahoo

13-05-2025

While the U.S.-China tariff pause is a step in the right direction for fashion, footwear and retail, there's still more that needs to be done in terms of trade deals to ease the tax burdens.
That's the consensus from fashion and retail trade groups, which said on Monday that they continue to push for better trade deals over the long haul that protect American firms and consumers.
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The truce followed a round of intense negotiations in Geneva, Switzerland, over the weekend, with the two countries issuing a joint statement Monday on their agreement to substantially lower tariff rates. Starting on Wednesday, U.S. tariffs on Chinese imports will be 30 percent, down from 145 percent, while China's duties on American imports will be 10 percent, from 125 percent. The parties plan to continue with talks over the 90 days that hopefully will lead toward a new trade agreement.
American President Donald J. Trump has been decrying trade imbalances and on April 2, disclosed the implementation of reciprocal tariffs. That left footwear manufacturers who produce in Vietnam and China wondering how to deal with their new cost structure. While much of the footwear for mass merchandisers and those targeting the lower-income consumers are made in China, the athletic performance shoes and sneakers have mostly moved to Vietnam as their main manufacturing base. Trump later declared a 90-day pause to give countries time to negotiate new trade deals with the U.S.
While the pause is seen as a plus by some on Wall Street, fashion and retail trade organizations say more can be done by the Trump administration.
'We're encouraged by President Trump and his administration's progress in the U.S.-China trade negotiations—this is a good step toward easing tensions, which is important for American businesses and consumers,' Footwear Distributors and Retailers of America (FDRA) president and CEO Matt Priest said. 'But we're not across the finish line yet. Some shoes still face duties approaching 100 percent, and that's unacceptable. We've outlined clear, reasonable exemptions in our letter to the Administration, and we urge them to take action to ease the burden on Americans further. Our industry needs relief—and so do the families we serve.'
More than 80 companies signed a letter sent to Trump on April 29 by the FDRA urging him to exempt footwear from his administration's reciprocal tariff plan. The signers included Nike, Adidas, Puma, Steve Madden, Skechers, Caleres and more.
'The 90-day pause is welcome and may temporarily help unstick the effective trade embargo that has been in place with respect to U.S.-China trade since April 9,' American Apparel and Footwear Association (AAFA) president and CEO Steve Lamar said. 'Sadly, the residual 30 percent tariff, stacked on top of the existing Section 301 and 'most favored nation' tariffs, will still make for an expensive back to school and holiday season for most Americans.'
Lamar said that if freight rates spike due to the tariff-induced shipping disruptions, which will take months to unwind, costs and prices could creep up even further. 'What's needed now is a long-term deal—not just with China but with all our trading partners—so we can predictably make long term trade, investment, and sourcing decisions,' he said. The AAFA CEO said news of the 90-day freeze follows weeks of advocacy by AAFA and others urging de-escalation and deals, as well as 'explaining how the current tariff policy does not support more U.S. manufacturing in our industry or the 3.5 million U.S. workers in industry currently employs.'
National Retail Federation president and CEO Matthew Shay said his retail trade organization is 'encouraged' by these constructive negotiations. 'This temporary pause is a critical first step to provide some short-term relief for retailers and other businesses that are in the midst of ordering merchandise for the winter holiday season,' he said. 'And over the long term, this lays the foundation for substantial progress in achieving truly fair and balanced trade relationships with both China and our other trade partners around the world.'
Shay noted there was still much for the two nations to discuss regarding ongoing issues, including working on the removal of 'remaining national security tariffs and provide long-term stability between the two largest global economies.'
'President Trump's announcement of an immediate de-escalation and 90-day pause to negotiate a long-term trade deal with China is welcome news to retailers grappling with tariff shocks and enormous disruption in supply chains ahead of seasonal and holiday ordering,' said Blake Harden, Retail Industry and Leaders Association vice president, international trade. 'We are hopeful the deal reached last week with the U.K. and today's announcement with China will build momentum for trade deals that protect American innovation and family pocketbooks.'
Harden also emphasized that retailers and its customers value the stability of permanent agreements over temporary policies. 'We applaud the administration for remaining at the negotiating table with China and the rest of our trading partners, including Canada and Mexico, to craft long-term deals that give businesses the certainty they need to invest, hire, and grow the economy,' he said.
According to Morningstar's chief U.S. economist Preston Caldwell, 'We had previously expected the average tariff rate to drop to 18 percent at end-2025. As of today's announcement, it's at about 16 percent, which is a faster tariff reduction than we had baked in. This takes a lot of the recessionary risk off the table.'
The de-escalation was seen as a plus for some footwear and retail firms, including shares of Nike Inc. and Five Below Inc. Jefferies analyst Randal J. Konik recommended buying shares of Nike and Five Below, the deep value retailer that sells goods—including sandals and slippers—at prices between $5 and $10. 'These companies offer several mitigating strategies and now face lower costs in the interim,' he wrote in a research note.
Konik added that the two are strong brands that can mitigate tariff impacts due to their scale. 'As trade discussions progress during the 90-day pause, management teams could witness significantly fewer costs, as most businesses have opted to plan with the assumption of a 145 percent tariff in place,' he said.
According to Konik, 50 percent of Nike's footwear production and 28 percent of apparel is in Vietnam, and for China, the percentages are 18 percent and 16 percent, respectively. Nike also produces 27 percent of its footwear in Indonesia, and 15 percent of apparel in Cambodia. At Five Below, a significant majority of its merchandise is manufactured outside of the U.S., with China as the largest single source of imported goods.
TD Cowen's John Kernan has a 'Buy' rating on shares of On Holding AG, with a current price target of $58.00. On has been trading in the $50 range. Kernan said the business 'has pricing power and nimbleness to offset a 10 percent to 20 percent tariff over time.' While Kernan is presuming a baseline 10 percent tariff on Vietnam and other Far East Asian suppliers, the final percentage remains up for debate.
Trump noted on Truth Social that the Vietnamese government, which was initially allocated an additional 46 percent in reciprocal tariffs, was quick to make overtures on April 4 that indicated an openness to find a solution that aims for a zero tariff (both ways) alternative.
And for retail's two upcoming key selling seasons, there is hope that the 90-day pause will allow them to get needed goods in time for back-to-school (BTS) and holiday.
Deborah Weinswig, CEO of Coresight Research, said that brands that have 'continued manufacturing and that have shipped containers of products to tax-free zones or bond warehouses are in great shape will be capable of quickly pivoting to move product into the U.S. in time for BTS.' Not so for those that hit the pause button as they will need time and money both to get people back to work and to restart the factories. Moreover, they'll likely have to rely on air freight—and incur added costs—to get goods into the U.S. in time for BTS
'We've been recommending that brands and retailers raise prices to reflect the higher cost of goods versus pausing manufacturing and shipping, and this new tariff pause is a perfect example of why that approach is critical to have goods on hand for prime shopping periods,' Weinswig said.
Investors on Monday welcomed the trade truce, even if temporary, as a sign that further talks could ease the tension between the two countries.
The Dow Jones Industrial Average skyrocketed 1,160.72 points, or 2.8 percent, to close at 42,410.10, while the S&P 500 rose 184.28 points, or 3.3 percent, to 5,844.19.
The top gainers among the footwear firms saw shares of Caleres Inc. spike up 15.5 percent to $17.40. It was followed by Steven Madden Ltd., up 14.9 percent to $26.41, and Genesco Inc., which rose 12.6 percent to $23.79. Amer Sports Inc. rose 11.4 percent to $30.04, while Wolvering Worldwide Inc. gained 9.0 percent to $16.67. Crocs Inc. was up 8.3 percent to $118.85 and Nike Inc. rose 7.3 percent to $62.58.
Among the retailers, Academy Sports and Outdoors Inc. skyrocketed 18.3 percent to close at $46.39, followed by DSW parent Designer Brands Inc., up 14.9 percent to $3.79, and Boot Barn Holdings Inc., which gained 13.3 percent to close at $133.30. Shares of Dick's Sporting Goods rose 11.3 percent to close at $212.42, Foot Locker Inc. was up 10.6 percent to $13.28, and Shoe Carnival Inc. rose 8.9 percent to $19.58.
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