Clothing and accessories retailers across the United States are delaying orders and freezing hiring ahead of tariff hikes that take effect Wednesday on products imported from Vietnam and China.
These businesses, much like Nike (NKE.N), opens new tab and Lululemon (LULU.O), opens new tab, face an impossible choice: offset the cost of tariffs by raising prices by some 40% – potentially cratering sales – or absorb the cost increase and further strain already-thin profit margins.
Unlike their bigger rivals, however, the smaller clothing and shoemakers lack vast supply chains, making them highly dependent on Vietnam and China.
Ian Rosenberger, CEO of Day Owl, a six-year-old New York company that makes backpacks in Vietnam, has paused future orders. Unless there’s a deal to significantly lower Vietnamese tariffs, Rosenberger estimates Day Owl has 30 days before it folds.
But with a production cycle of about 100 days, waiting much longer risks missing the crucial back-to-school shopping season. “The damage is already significant enough to be an existential threat,” he said, adding that his seven employees have been asking if they should prepare to be out of a job.
Rosenberger said tariffs would increase his duty to $22 from from $5, prompting him to increase the price of his top-end bag to $212 from from $155.
Footwear Distributors and Retailers of America – whose members include Nike, Walmart, Skechers, and Deckers – calculated that a $155 running shoe made in Vietnam would have to be marked up to $220 in U.S. stores to offset the 46% tariff.
