U.S. tariffs might move Puma production out of China

In the U.S.' brilliant plan to potentially impose taxes on footwear, Puma is currently looking at the prospect of moving its footwear production out of China and into other Asian markets. Puma has been seeing strong business in China due to increased demand for their product, resulting in strong first quarter sales, however they are cautious about the rest of the year due to the U.S.' impending trade war with China.

One-third of Puma's products are made in China, and the company is currently looking at moving production to other countries such as Vietnam, Indonesia, Cambodia and Bangladesh according to Business of Fashion.

"Our sourcing people have been working on alternatives for the last two or three months," said chief executive Bjorn Gulden to a conference call for journalists. "It causes headaches for many people."

Trump's trade war with China affecting production for Puma

Earlier this month, Donald Trump directed US trade officials to identify tariffs on 100 billion dollars more Chinese imports. This was done in response to what The White House called "a retaliation" against U.S. trade actions, which included 50 billion dollars of tariffs on Chinese goods.

U.S. tariffs could also mean that Puma could end up raising prices or accept a lower price margin. Since they aren't a market leader in the U.S., they have to wait and see what affect Trump's policies have on the market before they take steps to ensure they are still turning a high enough profit.

Puma's volumes are smaller compared to competitors like Nike and Adidas, so they will have less of a challenge moving production in comparison to some of their competitors. Puma had already been shifting production away from China over the past several years due to rising labor costs in the region.

If Trump is hoping that this trade war with China will bring jobs back to America, he is sadly mistaken. Gulden has already refuted the idea that higher tariffs could lead to more production in the U.S.

Trump is already being blasted for his tariff measures by some of the world's leading economic organizations, including the Federal Reserve, World Trade Organization and International Monetary Fund. Given Trump's unpredictable approach to policy, it is unclear what he will do next, or if he will lighten up on the tariff's. Either way, the world's international economies should brace themselves.

photo: via Puma.com