“It’s like the Grinch stole half of Christmas and is coming back to get the other half,” said Columbia Sportswear’s EVP and general counsel, Peter Bragdon, of the news that broke last week of the Trump administration’s revised two-tiered tariff rollout plan.
Bragdon told a room full of attendees that Columbia Sportswear, one of the industry’s most prominent and outspoken legacy brands, would take a beating during the first round of duties, set to take effect Sept. 1.
“Most of our product from China will be hit [in September],” he said of the added $1.5 billion duty. Bragdon added that a “very small amount” of the business would be affected by the second round of tariffs in December.
“That’s assuming that the policy today is the same as it was yesterday,” Bragdon joked, making light of the months-long trade war’s frequent ups and downs.
The Columbia veteran with political policy chops explained seriously that the U.S. workforce and American shoppers have the most to lose in the trade war. “These are economic sanctions put on American employers and consumers,” he said.
With a 10 percent increase on duties moving forward in two weeks’ time, Bragdon said Columbia was looking into “what products can be moved elsewhere [for manufacturing], and when.”
The outdoor brand’s diversification from China sourcing is a strategy that many apparel and footwear brands have begun to explore in recent years. “We’re thankful to be in a good position,” Bragdon said, adding that he “had talked to less diversified businesses, who don’t have the staff working on this, and they feel really trapped.”
As Bragdon and many of his industry counterparts have realized, “sometimes you can’t [move].” Some products can’t be sourced cheaply, efficiently or with the standards that consumers have come to expect, and so brands must stay in China to preserve the integrity of their product lines.
And Vietnam, the favored China alternative, is already the biggest beneficiary of businesses fleeing Chinese. That’s leading to tightened capacity, he explained.
Priest posited that the uncertainty around the trade war could be leading to artificial price spikes in Vietnam, too, because brands are running scared without waiting for the outcome.
Despite the scheduled tariff increase, Columbia has vowed not to raise prices at retail.
Instead, the company is looking at ways to change its product designs and materials in an attempt to sidestep the tariffs’ blows. Bragdon also said that a small number of products will cease to be sold in the U.S. because “we can’t do so profitably.”
One thing the administration needs to realize, Bragdon said, is that “the constant threat [of tariffs] has a cost to it.”
“If brands are sitting here in the middle of August thinking there’s going to be a price increase Sept. 1, things are already in motion,” he said.
“There’s a total misunderstanding in Washington about how supply chain works,” he added, noting the administration’s seeming ignorance about the strains on factory operations under the insecure threat of tariffs.
Bragdon also expressed misgivings about the way that the negotiations over the Obama-era Trans-Pacific Partnership proposal (TPP) had played out.
“In the last administration there was some effort to incentivize change through the TPP, in the form of moving away from China,” he explained. He pointed to Canada, which remained successfully engaged with the ensuing deal and encouraged the U.S. to source in Vietnam and other countries.
He believes that Trump’s rejection of TPP was hasty and not well thought-out.
“I think there’s shortage of real understanding about trade,” Bragdon told attendees. “There’s a reason that trade policy has taken place over the course of years and decades. It’s been an ongoing discussion.”
“We’re a strong business with a strong balance sheet, and we’re preparing [for the tariffs],” Bragdon said. “Unfortunately, people have to feel the pain of what’s being done, and I think some of the chickens are coming home to roost.”