A Sunday afternoon tweet from the president announcing that tariffs on $200 billion of Chinese imports were increasing from 10% to 25% came as a surprise to many who thought the United States and China were close to a trade agreement.
While some brands (and financial markets) were sent reeling by the increase, the impact on outdoor apparel and equipment manufacturer and retailer Columbia Sportswear has been minimal. But the brand has no idea how much longer that will be the case.
Long before Trump took office, apparel and footwear companies, including Columbia, were subject to considerable tariffs. These date back to the infamous Smoot-Hawley Act, passed eight years before Columbia’s 1938 founding. The average tariff on Columbia products is in the low double digits. For some products, it goes as high as 37.5%.
“It helps that we’ve had 90 years to deal with awful policy,” said Peter Bragdon, Columbia Sportswear’s evp, chief administrative officer and general counsel. “Other companies are probably going to get a taste of what we’ve been dealing with.”
In those 90 years, Columbia has developed a flexible and extensive supply chain to deal with myriad trade agreements between countries and other fluctuations in the global market. Its wares are now produced in more than 20 countries, including China (though Vietnam is the biggest producer).
Not all of those goods will be sold in America; over 40% of Columbia’s sales are to the approximately 90 other countries where its products are sold. Jeff Tooze, the company’s vp of global customs and trade, said that many of the goods produced in China are also sold there.
“China is one of our largest international markets,” Tooze said. In fact, Columbia recently ramped up its push to grow its business there, and said the escalating trade war will not change those plans.
Despite Columbia’s decades of experience with duties and the fact that many of its products, such as clothing and footwear, were left off of the tariff list, the brand couldn’t completely mitigate their effect. This is largely due to Trump’s uniquely impulsive style of imposing them. Hats and headwear were hit hardest.
“There just wasn’t enough time to react,” Tooze said. “Your prices are set, products already sold. We learned about it practically overnight, with very little notice … you still didn’t know from day to day. So that very first round, that 10%, there was nothing we could do but eat it.”
This has been true for many retail businesses, according to Jon Gold, vp of supply chain and customs policy for the National Retail Federation.
“The quick imposition of the tariffs does not leave companies enough time to make significant changes to their supply chains,” Gold said. Companies that put all of their manufacturing eggs in China’s basket, obviously, were in the worst position.
But the tariffs cost Columbia in other, less obvious, ways.
“The uncertainty and the constant shifting in approach to trade policy is highly unusual and creates management distractions,” Bragdon said. “It becomes a consideration in all the investment decisions that we’re making in the company, all of our long-range planning. … Uncertainty is the enemy of investment.”
Even the displays in Columbia’s brick and mortar stores felt the burn, thanks to the steel and aluminum tariffs.
“In the name of national security, the cost of mannequins went up,” Bragdon said.
By the time the tariffs increased to 25%, Columbia said, it had already arranged its manufacturing so that tariffed items were made in countries that aren’t in the middle of a trade war with the United States.
But it’s difficult for Columbia to prepare for future tariffs, given the sudden onset and volatility of past duties. The tariff increase that took effect last week was originally supposed to take effect on January 1, then was delayed until March, then delayed “until further notice,” and then tweet-announced with just five days’ notice. Items on tariff lists have been dropped before the tariffs went into effect.
Trump himself doesn’t seem to know what the future holds, recently tweeting that the tariffs “may or may not be removed.” A blanket tariff on all Chinese imports—which Trump has threatened to impose in June—will “affect a significant portion of our products,” Bragdon said. But it’s difficult to plan for or predict how significant that portion might be, how long the tariffs will be in effect, and how big of a hit Columbia might take because of it.
What Bragdon can predict is who will ultimately pay for these tariffs: American consumers. Though the president frequently claims that China is paying for the tariffs, they are actually paid by the American company that imports the product. And then they’re paid by you.
“At the 10% level, some companies have been able to absorb the cost,” Gold said. “At 25%, companies are not able to absorb that cost and will have to pass along some, if not all, of the price increases to their customers.”
“We’re highly confident that consumers will end up paying the price,” Bragdon said. “When that happens, politicians may be the second ones to pay the price.”