Steep new U.S. tariffs on imports are rattling businesses large and small, with many companies planning to absorb the higher costs by hiking prices for customers. Not footwear company Keen.
Although the midsize company, based in Portland, Oregon, operates in an industry that is highly exposed to tariffs, Keen tells customers that it will keep prices steady this year no matter how tariffs affect its costs. That’s no idle pledge calculated to preserve market share — Keen has been steadily retooling the business for years to protect itself from sudden shifts in global trade and the vagaries of geopolitics.
“We have been preparing for this for over a decade. Early on, we saw the risks of being overdependent on any one country, so we made the decision to diversify our supply chain well beyond China,” Chief Operating Officer Hari Perumal told CBS MoneyWatch.
The 22-year-old company, with 650 U.S. employees and owned by design and brand management company Fuerst Group, has worked to reduce its dependance on Chinese manufacturing while expanding its U.S. presence and diversifying its supply chains.
President Trump’s tariffs are upending retailer supply chains, forcing them to devise workarounds. That can mean moving manufacturing to another foreign country with lower tariffs or investing in U.S.-based production. For small businesses, tariff-driven uncertainty can mean shutting operations down altogether when the financials no longer add up.
Shoe and clothing prices could soar
Footwear companies are particularly vulnerable to the upheaval caused by President Trump’s trade war given their reliance on China, where 36%, or $9.8 billion’s worth, of imported footwear sold in the U.S. is made, according to a TD Cowen analysis of international trade data.
For that reason, tariffs are expected to hit footwear and apparel companies hard, and that impact will be felt by American consumers as well, according to Jason Judd, a global supply-chain expert and executive director of Cornell University’s Global Labor Institute.
In 2023, U.S. households spent an average of about $1,700 per year on footwear and apparel, Judd said. He expects that figure to surge 70% in the short term, to $2,800 per family, because of tariff-related price hikes. In the coming years, meanwhile, consumers are still likely to be paying more for footwear and clothing because of higher global tariffs.
“That pain will lessen as terms and sourcing patterns change, but the longer-term costs per family will still be around a $425 increase per year.”
The abrupt change in tariff policies is already rippling across the industry. German sportswear giant Adidas last month warned U.S. customers that “cost increases due to higher tariffs will eventually cause price increases.” And retailers across various industries, from apparel to food, have started passing some of the cost from higher import taxes to consumers in the form of “tariff surcharges.”
“We saw the writing on the wall”
Today, Keen operates plants in Shepherdsville, Kentucky; the Dominican Republic; and Thailand, where it handles a third of the company’s global production. It also contracts with manufacturing partners in Cambodia, India and Vietnam, all of which are subject to impending new U.S. levies. Cambodia faces a country-specific tariff rate of 49%, while Vietnam and India face levies of 47% and 27%, respectively.
“We do have 10% exposure in those countries, but the 10% tariff we’re dealing with is significantly lower than what other companies are facing on products that would come out of China,” Perumal told CBS MoneyWatch.
Back in 2015, executives at Keen were already taking note of rising labor costs in China. Today, the company’s broad supply chain helps it spread costs across the company, its manufacturing partners and their suppliers, he said. Keen, which is privately held, declined to share information on its annual revenues.
“We are making a conscious decision not to increase prices, but that’s shared by our partners,” he said. “They share some of the costs with us, then they go to the company they buy materials from, and those tier-one suppliers share some of the costs as well.”
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