ADVERTISEMENT

ADVERTISEMENT

Sneakers show limits of trade policy in reviving jobs for Trump

American companies from appliance makers to auto parts suppliers have lined up to offer a quiet caution to President-elect Donald Trump as he considers pulling the United States from trade deals: most lost manufacturing jobs aren't coming back, b...

In this undated photo, a line of children's sneakers manufactured by New Balance are on display at clothing shop in Hanau near Frankfurt, Germany. REUTERS
In this undated photo, a line of children's sneakers manufactured by New Balance are on display at clothing shop in Hanau near Frankfurt, Germany. REUTERS

American companies from appliance makers to auto parts suppliers have lined up to offer a quiet caution to President-elect Donald Trump as he considers pulling the United States from trade deals: most lost manufacturing jobs aren't coming back, but higher costs for consumers could.

Consider the sneaker industry, one of the first to move to Asia because of the sharply lower cost of production in China and Vietnam.

Nike and its smaller, privately held rival New Balance split over the question of whether the U.S. should back the Trans Pacific Partnership (TPP) trade deal. But if Trump and a Republican-controlled Congress nix that trade deal as expected, both companies and the analysts who track them agree Asia is poised to keep its dominance as the industry's manufacturing hub.

Companies like Nike have invested too much in those lower-wage economies to consider moving factories, even if tariffs rise and push up costs for American consumers, analysts say. Any new hiring in the U.S. will be years down the road and depend on refining production technologies like 3-D printing that could make it profitable to hire relatively small numbers of American production staff. The same dynamic applies to other industries, like auto parts, which have moved production to Mexico over the past two decades, executives say.

That suggests a problem that the Trump administration will bump against if it tries to pursue a harder line on trade agreements from NAFTA to TPP. Shoe companies, like other manufacturers, could be forced to pass on higher costs to consumers, but few executives see a serious case for new hiring in the U.S. States because of a change in tariffs on imports.

ADVERTISEMENT

"The idea of moving shoe manufacturing to advanced countries is a little bit of a farce," says Ed Van Wezel, the CEO of Hi-tech International Holdings BV, an Amsterdam-based shoemaker that sells about 30 percent of its shoes in the U.S.

The U.S. imports about 98 percent of its footwear - 2.5 billion pairs last year, or nearly eight pair for every man, woman and child. Shoemaking went offshore decades ago, mainly to China, because the process is so labor intensive. Making a single pair of running shoes can require up to 80 production steps.

The average shoe worker in Vietnam earns about $245 a month, while shoe tariffs can range from zero up to 48 percent, according the U.S. International Trade Commission. The average is just over 13 percent.

"The ones that stand to lose out here are consumers, because if we start to eliminate trade deals, they'll be paying a lot more for shoes," says Matt Priest, president of the Footwear Distributors and Retailers of America, which represents the industry in Washington.

The same dynamic is seen in other industries.

Ford CEO Mark Fields said last week that big tariffs on cars and trucks imported from Mexico would hurt the auto industry and the U.S. economy. But he remained committed to making small cars in Mexico because the profits on making those cars in the U.S. are so low.

The other side of trade

New Balance, based in Boston, makes only about a quarter of the shoes it sells in the U.S. at its five New England factories, and figures that costs 25 percent to 35 percent more than it would to make them in Asia.

ADVERTISEMENT

The private company, owned by former marathoner Jim Davis and his wife Anne, says it makes up for that cost disadvantage in part by producing higher-end and customized shoes in those U.S. plants. If the company were publicly traded, it would likely face pressure from shareholders to move all its production abroad.

Beaverton, Oregon-based Nike imports nearly all its shoes, and fought for the Trans Pacific Partnership, a trade deal that became a lightning rod in the recent presidential campaign. Nike said last year that it would create 10,000 manufacturing and engineering jobs in the U.S. if the deal were adopted. Nike has clarified that those jobs would largely be aimed at creating more automated factories, not old-style production that would employ thousands of assemblers.

New Balance fought the TPP, arguing that it would jeopardize its U.S. plants by giving competitors like Nike more profits they could pour into developing new machines, products and advertising.

That opposition has proven costly for the iconic brand. In the wake of the election, a New Balance spokesman welcomed what he saw as a likely defeat for TPP.

Many critics seized on his comments as an endorsement of Trump, and some consumers burned their shoes. Backlash flared again after a neo-Nazi website proclaimed New Balance the "official shoes of white people."

The company said the original comments were only meant to reflect its opposition to the TPP, not support for Trump.

"For us, this is and always has been about the creation and retention of manufacturing jobs in support of our five New England factories," the company said in a statement.

Related Topics: MANUFACTURING
What To Read Next
Minnesota Crop Improvement Association on Jan. 12 presented the Achievement in Crop Improvement Award to Paul Kjolhaug, part owner of the MayerSeedLine company, located in Willmar. Kurt Flegel, of Benson, was named a Premier Seed Grower.
Christianson PLLP has merged in DM Hoffbeck and will retain the current offices and staff of in Fairfax, Morgan and Redwood Falls.
Teresa Carlson has been an employee of Christianson PLLP since 2005 and is the firm's newest partner.
Ken Quist is an independent LPL Financial adviser at Quist Wealth Management in Willmar.