A tariff on imported sports shoes — 99 percent of all such shoes sold in the U.S. –may or may not be a good thing, depending on who has to pay it.
Nike wants to end the tariff. New Balance wants the tariff retained.
Vietnam is the world’s second biggest producer of sports footwear, exceeded only by China. Vietnam ‘s principal footwear customer is Nike, of Beaverton, Oregon, the world’s biggest maker of athletic shoes, with $24.1 billion in annual sales. The tariff on imported Nike shoes is about $3.00 per unit.
New Balance also makes shoes in Vietnam, but also has footwear factories in the U.S, and wants the tariffs on imported shoes to remain in force. Removing the tariff on footwear would give Nike an unfair competitive advantage over New Balance, says the Boston-based company.
Although New Balance manufactures seven million pairs of shoes in the U.S. annually, this accounts for only 25 percent of the firm’s total shoe production, according to Matthew LeBretton, director of public affairs. Besides shoes made in China and Vietnam, the remainder of New Balance’s yearly output is made in Indonesia and the U.K.
Foreign-made footwear is more profitable for U.S. sellers, but New Balance wants to retain its domestic factories “…for reasons that are other than financial impact,” LeBretton said.
“It’s the right thing to do,” he said. “We suffer as a country when we lose the ability to manufacture.” Key advantages for New Balance’s domestic production include
faster reaction to demand from U.S. retail stores, which enables retailers to carry lower inventory, and better quality control.
From Nike’s viewpoint, cutting the tariff makes sound financial sense. At least one Oregon Congressman endorses Nike’s support for the tariff. Earl Blumenauer (D-Ore) says retaining the tariff taxes millions of shoe buyers to save a few thousand U.S. jobs.
Vietnam will also benefit if the tariff is cut and wants it eliminated as part of a free-trade agreement with the U.S. and nine other Asian and Pacific area nations. Negotiations on the free-trade deal will continue in Singapore in March, as Trans-Pacific Partners (TPP) meet for the 16th round of talks.
New England legislators have lobbied President Obama for a special exemption for New Balance in its request to maintain the tariffs.