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Crocs Says New Tariffs Could Force it to Cut China Production in Half

If President Trump’s proposed additional tariffs on China prove more than a bluff, the move could reshape the footwear sourcing map.

On Tuesday, Crocs elaborated on the impact its business could see under a new tranche of footwear tariffs, saying the additional duties could see the brand scaling back on its China production by more than 50 percent by 2020.

The brand behind Gen Z’s favorite fashion clog struck a more reserved tone regarding the possibility of new footwear duties than some of its peers in the industry, saying the tariffs would not have a “materially adverse” impact on its business if approved. However, in the same breath, Crocs admitted that it currently imports a sizable portion of its products in China and was still able to outline a dollar impact based on that figure.

“We currently import approximately 30% of our U.S. product from China,” Crocs said in a statement. “Assuming a 25% tariff takes effect on August 1, 2019, we estimate the 2019 impact at approximately $5 million.”

Crocs said it feels confident its business will be able to adapt to the new trading conditions thanks to a globally diversified sourcing base. Crocs said its sourcing strategy has long been designed to limit its exposure to any one area amid a global climate defined by increasingly protectionist economic policies.

What’s more, the brand said the evolution of its sourcing policies—i.e. moving away from rigid seasons and closer to a “drop” model—has naturally led it to pull away from producing products in China, as well.

“Our current sourcing mix reflects our need to balance ramping up incremental supply to meet the growing demand for our product and continuing our multi-year effort to reduce our sourcing from China,” Crocs explained.

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Although the brand said it would be exploring “various mitigation initiatives,” its primary strategy in China now is to accelerate its plans to leave the region. According to Crocs, if the proposed new duties were to take effect today, the brand would likely produce less than 10 percent of its products in China by 2020.

As has been the case, it remains unclear whether the proposed tariffs will in fact move forward and, if so, when the industry would start to feel the impact.

According to the American Apparel and Footwear Association (AAFA), the time to testify for or against the proposal has now passed and the tariff tranche is now moving to the next stage of approval. Many brands have begun to prepare by boosting imports and pre-tariff inventory levels in the process.

Trump says it is possible he could make a decision on the future of these tariffs after the G20 summit,  which will take place June 28-29.