Matt Priest, President and CEO of the Footwear Distributors and Retailers of America (FDRA) has expressed concern about possible new U.S. tariffs adversely impacting the industry.
On July 17th, Priest spoke at a Port of Los Angeles media briefing with the Port’s Executive Director Eugene Seroka.
Tariffs and Options
In 2024, US importers are increasing their shipments in anticipation of the imposition of new tariffs on imported goods:
“There's the whole question about if the former president (Donald Trump) wins the election in November and his proposals to have a universal tariff on all goods of 10% and then tariffs on Chinese goods … 60%. That is driving a lot of interest for our members about how to start to bring in products maybe before some of those decisions to push duties up, which therefore obviously would impact cost and our consumers who ultimately pay the price of those duties. So … sourcing in the 21st century is not for the faint of heart but our members … have been resilient and have a lot of wisdom just … based on the last few years of … what they've dealt with.”
In the event a new Trump administration proposes higher tariffs, the footwear industry will respectfully disagree: “Look, the president, the former president, is putting out a lot of proposals that would fundamentally alter the approach to trade or at least continue the trends that he put forward in his first term. And so, we now have a record of policy decisions behind us that help inform us on how to best … navigate … that scenario. For us as an industry, part of it is … engaging with the administration … in a respectful way. We understand that there's kind of a rise in … consideration of the utility of tariffs, but we're also the poster child (for how) tariffs did not keep domestic production in place. We … pay $4 billion a year in tariffs and we have 99% import penetration. So, we hope that if there are decisions made that … include additional tariffs, which is a real possibility that we have to plan for our members (to) engage with the administration no matter who it is, whether it's … a second Biden term or it's a second Trump administration.”
Moving Production Out of China
Priest said that the U.S. footwear industry has begun to move production out of China and has increased its reliance on alternate suppliers particularly Vietnam:
“We source (from) China, Vietnam, and Indonesia well over 90% of our volume. Well before September 1st, 2019, when the additional tariffs on Chinese footwear went into effect, an additional billion dollars a year, we paid $4 billion a year in … tariffs … Well, before that, we were shifting out of China because of the cost of living, because … the workforce (is) not interested in working in footwear … and we were moving to Vietnam, and that was a trend that has continued now for well over a decade. So, most of the market share (with) China … has been captured by Vietnam and in partnership with Taiwanese joint venture companies, local Vietnamese companies, even Chinese joint venture companies.”
Importance of West Coast Ports
As a result, the footwear industry moves the bulk of its imports through West Coast ports:
“We … have a love affair with the West Coast as it relates to imports. Over 90% of our volume comes from China, Vietnam, and Indonesia. … We're not as highly diversified as other industries because … product production is still labor-intensive. It takes a lot of hands to create and ship and bring in two and a half billion pairs of shoes every year. And so, our direct access to the West Coast ports has been critically important … to our industry.”
However, Priest said the footwear industry is concerned about rising freight rates:
“That being said, the challenges ... in the Red Sea and Panama Canal may affect some of … our global brands that are moving product from Asia into the European market, but they are having an impact in overall rates. Rates are higher than they have been for us in … well over two years.”
Port of LA Cargo Data Services
Priest said the Port of Los Angeles cargo data services have been a big help to the footwear industry in having better data on the status of container shipments: “Not knowing where your goods are at any given moment is not a good strategy. So having that full line of sight from the factory floor to the consumer retail shelf is critically important and should not be taken for granted. So, the more information … that importers have access to … we publish ... for our members. We send it out and reference it for our members so that they know that the ports such as the Port of LA putting out this information (and) there is no excuse not to know (what) kind of volume and how much, where containers are coming through and what some of the holdups may be. And the last thing I will say is from a trade association perspective, we are curating these conversations around supply chain visibility. So, we have a weekly call, we call it our family meeting every two o'clock East Coast time on Tuesdays, and the Port of LA is on that call and providing critical updates to our members.”
June 2024 Cargo Data
Seroka said the Port of Los Angeles processed a healthy 827,757 Twenty-Foot Equivalent Units (TEUs) in June, a 10% increase over the previous month and less than 1% compared to last June, which was the Port’s best month in 2023. Six months into 2024, the Port of Los Angeles is 14% ahead of the previous year.
Seroka noted the following:
- Cargo volume was 827,757 TEUs in June 2024 compared to 833,035 TEUs in June of 2023.
- Imports in June were 428,753 TEUs compared with 435,307 TEUs in June 2023.
- Exports in June 2024 were 122,515 TEUs compared to 108,050 TEUs in June 2023.
- Empty containers were 276,489 TEUs in June 2024 compared to 289,679 TEUs for the same month in 2023.
Port of Long Beach’s Higher Volumes
Meanwhile, next door, the Port of Long Beach said it achieved its busiest June on record, driven by “vibrant consumer spending, potential tariff increases, and ongoing labor contract negotiations at seaports on the East and Gulf Coasts.”
In June 2024, the Port said it “moved 842,446 twenty-foot equivalent units in June, up 41.1% from the same month last year and surpassing the previous record set in June 2022 by 7,034 TEUs.”
Meanwhile, “Imports jumped 53% to 419,698 TEUs, exports rose 4% to 98,300 TEUs, and empty containers moving through the Port increased 42.1% to 324,448 TEUs.”
“We are recapturing market share and consumer spending is driving cargo to our docks as we head into the peak shipping season,” said Port of Long Beach CEO Mario Cordero. “I see modest growth for the second half of 2024 as we strengthen our competitiveness and continue to invest in our rail infrastructure projects that will maximize cargo velocity efficiently and sustainably for decades to come.”
The Port has moved 4,291,626 TEUs during the first half of 2024, up 15% from the same period last year.
Port of Oakland: Import and Export Increases
The Port of Oakland, in Northern California, also reported increases: “The Port of Oakland June full container volume continues to grow, showing signs of a return to pre-pandemic trends. Full imports jumped 26.8%, with 84,040 TEUs (twenty-foot containers) handled by port operators in June 2024, in contrast to 66,295 TEUs in June 2023, marking the highest monthly total since August 2022.”
“We are seeing promising signs from ocean carriers and importers, who are beginning to increase their inventories in preparation to meet holiday and year-end shopping demand,” said Port of Oakland Maritime Director Bryan Brandes. “The peak season usually begins in late summer to early fall, but this year it appears to be early…”
The Port said: “Full exports saw an increase of 22.9%, with 66,540 TEUs transiting in June 2024, compared to 54,138 TEUs in June 2023. Full exports continue to recover from the depressed volumes seen during the pandemic and have stabilized around 65,000 to 70,000 TEUs each month. Oakland remains a leading gateway for agricultural and recycled materials exports.”
