US companies brace for price hikes as tariffs on Chinese imports loom

As the potential for increased tariffs on Chinese imports looms, several major companies are scrambling to adjust their supply chains and prepare for rising costs.

Steven Madden Ltd. is fast-tracking its plans to move production out of China after Donald Trump's US presidential election victory heightened the likelihood of increased tariffs on imports. The shoe retailer now plans to cut its goods manufactured in China by 40 per cent over the next year, a significant jump from its previous goal of a 10 per cent reduction, Caliber.Az reports via foreign media.

“We are putting that plan into motion,” said Chief Executive Officer Edward Rosenfeld during an earnings call. Consumer companies are scrambling to anticipate the impact of potential tariffs, which could raise prices on everyday products.

Trump has proposed a 60 per cent tariff on goods imported from China and up to 20 per cent on items from other countries in an effort to encourage more domestic manufacturing. US-based companies have long relied on Chinese factories due to their lower production costs.

“If we are contemplating a new policy where there are significant tariffs on China, that’s going to have all sorts of wide-ranging implications not only in the supply chain, but the overall economy,” Rosenfeld explained to analysts. Whirlpool Corp., which manufactures Maytag and Amana appliances, also foresees higher prices on microwaves if tariffs are raised.

“The biggest thing we get out of China is microwaves,” Chief Financial Officer Jim Peters said in an interview before the election. However, Peters noted that Whirlpool would be somewhat shielded from tariff risks since it produces most of its goods sold in the US domestically. Cat litter made from silica gel is expected to see price increases, according to Oil-Dri Corp. CEO Dan Jaffee. The company, which produces Cat’s Pride and Jonny Cat litters, stated that China is currently the sole source for this material. Church & Dwight Co. has already shifted some of its production out of China, notably for its Waterpik oral-care products.

“There are plans in place and actions that we’ve taken to mitigate that impact,” said CFO Rick Dierker last week in response to questions about tariffs. “Just like everybody, we’re well aware of implications there.” At Steven Madden, nearly half of its business is at risk of being subject to tariffs on Chinese imports. If the company’s strategy to reduce its exposure proves successful, this percentage could drop to around 25 per cent within the next year.

The company has been moving its supply chain to countries like Cambodia, Vietnam, and Mexico. Several years ago, the retailer imported almost 95 per cent of its products sold in the US from China. Steven Madden's CEO, Edward Rosenfeld, had previously stated that reducing reliance on China by more than 10 per cent annually would be difficult. However, he didn’t specify how the company would meet its accelerated target. “We think we have the plan to do it,” he told analysts.

By Naila Huseynova