Why Trump’s Favorite Shoe Company Is Fighting the White House (w/ Thomas Florsheim Jr.)

Less than 1% of all shoes sold in the US are made domestically, primarily due to the high cost of labor for this labor-intensive, low-skilled industry. Reshoring is economically infeasible, as it would double the retail price of a $150 shoe to over $300, and the entire component industry (tanneries, shoeboxes) has moved offshore.

less than 1% of all shoes that are sold in the US are made in the US. So not just your company's shoes, but you're saying 1% of all shoes nationwide from all distributors, all manufacturers are made actually in the United States. That's correct. Only 1% or less. Why is that? Primarily due to the cost of labor. The shoe industry is a very labor intensive industry. It's fairly low skilled labor. And so work like that in the shoe industry as well as in the apparel industry moved offshore because of the comparative advantage you have in places like India as far as labor rates... If you were to try to manufacture men's shoes in the United States, what kind of price point would we be talking about given those higher labor and any other input costs? ...at a very minimum they would be double that price. Um probably well over $300. ...There's no component industry left in the US. It's difficult to even buy a shoe box in the US. Now, all of that, including the tanneries, have moved over to the places that are making shoes today.

Weyco Group faced incremental tariffs of up to 145% on top of existing 16% tariffs from China, making import costs more than double. Because sales orders were locked in, the company had to absorb the majority of these costs, leading to a $19.8 million payment to Customs and significantly reduced profits.

the incremental tariffs were ramped up to 145%. So, what that means is if the first cost of a shoe is $50, you're going to pay a tariff of of something like $75 on a $50 factory cost shoe. ...For China, for China, they were already 16%. Okay. Wow. Okay. So, you're paying like whatever it was 161% ...all of a sudden, the cost of our product in some cases is more than doubling and we're selling shoes and we're losing money. And so, you're just having to eat the cost? Exactly, because we when we get a purchase order from a customer, that's essentially a contract. ...We ended up remitting $19.8 million to be precise. ...our profits were off considerably last year.

The constant, unpredictable changes in tariff policy (tariffs changed 20 times in a year) forced Weyco's leadership and departments to spend tremendous time on logistics, reordering, and shifting production between countries (e.g., China to India, then India to Vietnam/Cambodia). This diverted resources from long-term strategic investments like acquisitions or distribution center expansion.

it was really it's very very difficult for businesses who need to be able to plan, price their product, you know, figure out other investments, and and everything kind of came to a halt, which is not good for business. ...it's taken up a tremendous amount of my time. And what I think about is the opportunity cost of that. You know, you want the CEOs of company to think long-term and strategically and figure out what what they should be investing in. Is that an acquisition? Is it an investment in a bigger distribution center? And for us, along with I would say most of the companies in our industry, all of that got put on hold because we were just trying to figure out how we price product, not lose money, and how we're going to move shoes to all these different countries. ...these tariffs have literally changed 20 times and so it's just you don't know what tomorrow's going to bring.

Weyco Group, initially hesitant due to fear of retaliation, joined a lawsuit against the federal government after Customs retroactively demanded an additional 100% tariff on past shipments, amounting to an extra $1.5 million. This legal action was taken to protect the company's financial standing and ensure eligibility for potential refunds, which later materialized after a Supreme Court ruling.

But then the situation with the tariffs just continued to get worse and what Customs started to do was go through old entries and they came back to us on entries that had on shoes that had shipped in March before Liberation Day and then they they said we owed them another 100%. And so we got a bill from Customs a few months ago for 10 entries and that bill was an extra million and a half. ...At that point we decided we're going to sue the government. It's just we've had it we had enough. ...we wanted to make sure that when refunds happen, we were hoping that they would happen, that we were protecting our status with this lawsuit. ...This was before the Supreme Court ruled against tariffs, but we wanted to protect ourselves if they if if they did rule that way. And as you know, they did rule that way. So, we were in good standing.

Weyco cautiously raised prices by only 10% (despite much higher tariff costs) to maintain market share, recognizing that shoe demand is elastic and higher prices would reduce sales volume. This demonstrates that tariffs ultimately translate to higher costs for consumers and potentially fewer purchases, especially in an inflationary environment where consumers have less disposable income.

the demand for shoes is pretty elastic. If you raise the prices, the demand goes down. And so, that is why we took a conservative approach. And even though the tariffs were much larger, we increased our prices in July of last year by 10% ...We're in an environment where we've been through number of years of inflation where the prices of a lot of things are up. And so, we're dealing with a consumer that does not have a lot of extra money in their pocket. ...this ends up adding cost to the shoes for consumers. And so, that is causing inflation, it's causing the price of our product to go up. ...that hurts our consumers here in the US. And and as you said earlier, it means that probably they're going to be fewer sales.