Skip to navigationSkip to content
FILE PHOTO: Bjoern Gulden, CEO of German sports goods firm Puma, attends the company's annual news conference in Herzogenaurach February 20, 2014. REUTERS/Michaela Rehle/File Photo - RC1604329A20
Reuters/Michaela Rehle
Puma’s CEO, Bjorn Gulden, is watching and waiting.
WARY EYE

Trump’s escalating trade war with China has spooked at least one sneaker company

By Marc Bain

Donald Trump’s threat of a new round of tariffs on China has consumer goods companies on edge. While they were generally spared (paywall) in the last round, Trump on April 4 directed the US trade representative to consider another set of tariffs totaling $100 billion. This time, experts think it’s inevitable (paywall) that consumer products, such as clothing and shoes, would get hit.

The threat is real enough that German sneaker maker Puma is preparing in case it needs to move its production out of China. “Our sourcing people have been working on alternatives for the last two or three months,” CEO Bjorn Gulden said on a conference call with journalists. “It causes headaches for many people.”

The US is such a large and important market that a company’s performance there can have major effects on its business. If Trump’s new tariffs do target consumer goods, brands that manufacture in China and sell their goods in the US—which is a huge number of companies—will see their products get hit with higher duties as they enter the US on their way to store shelves. A brand can either accept the hit and watch its margins shrink, or raise its prices at a time when shoppers are highly price sensitive, which is why many retailers and manufacturers oppose such tariffs.

Puma, which makes about one-third of its products in China, is looking to sidestep the issue. Gulden said the brand is exploring ways to source more of its shoes in countries such as Vietnam and Indonesia, and more of its apparel in Bangladesh and Cambodia. (In the near term, it couldn’t shift production to North America, he said, because there’s just not enough production capacity.) The process would take about a year to complete, and would be “unpleasant.”

Puma does have one advantage in that it’s much smaller than some of its competitors. Nike and Adidas, for instance, are far larger, which makes the effect on sales and the difficulties of moving their sourcing greater. For both, China is among their top three footwear manufacturers and their single largest apparel supplier.

And that’s to say nothing of numerous other brands, from Apple to Levi’s, that similarly make a lot of their goods in China and then ship them to the US for sale. They’ll be watching as the Trump’s trade battle against China carries on.