Summary of the Article: Rising Costs in the US Leather Goods Industry
This article details the notable price increases impacting the US leather goods industry, driven by a complex interplay of factors including inflation, supply chain disruptions, and tariffs. Here’s a breakdown of the key points:
1. Increased Costs Across the Board:
* Raw Materials: Hides are more expensive due too pricier sourcing.
* Production: Foreign processing (tanning,cutting,stitching) costs have risen.
* Shipping: Freight charges have increased.
* Tariffs: New and existing tariffs, particularly on imports from china, Vietnam, Italy, and India, are a major driver of cost increases.
2. Projected Price Increases:
* The Yale Budget Lab projects leather goods prices will remain elevated by almost 22% for the next 1-2 years.
3. Global Supply Chain Reliance & Vulnerability:
* Most US leather goods begin with American hides, but are typically shipped overseas (primarily to Asia) for tanning.
* Leather is often further processed (cutting, stitching) in countries like China, Vietnam, Mexico, or India before returning to the US.
* This reliance on foreign production created problems when tariffs were implemented, disrupting the flow of goods.
* the US has a significant leather trade deficit ($1.37 billion imported vs. $92.7 million exported in 2023). China supplies about one-third of all leather goods imported into the US.
4. Company Responses & Impacts:
* Tapestry (Coach & Kate Spade): Anticipates $160 million in tariff-related expenses and “greater than previously expected profit headwinds.”
* Twisted X: Reduced tanning in China (from 90% in 2017 to roughly 50% now) and is actively working to reduce reliance on China, but faced challenges finding option production locations (bottlenecks in Cambodia/Bangladesh, longer lead times in Vietnam, tariffs on Indian exports).They raised prices by 1-3% this year.
* Steve Madden: Experienced a “challenging” third quarter due to tariff impacts.
* Industry-wide: Companies initially absorbed costs, but that buffer is shrinking.
5. Key Quote:
* John Ricco (Yale Budget Lab): “The reason why leather is hit so hard is twofold… No. 1, some of these tariff rates that are the highest are placed on different countries where we import most leather. The second reason is that we just import a lot of leather, and, more broadly, apparel-related products from these trading partners than we make.”
in essence, the article paints a picture of an industry struggling to navigate a new landscape of increased costs and supply chain complexities, ultimately leading to higher prices for consumers.
