Stocks tanked, a major U.S. bank upped its risk of a recession to 60%, and brand executives scrambled Thursday to come up with a plan to respond to the severe tariffs announced Wednesday by the Trump administration.
Paul Naude, the CEO of surf and wetsuit apparel brand Vissla, said everyone had just worked through the most recent 20% tariffs that the Trump administration had announced on goods from China, when the even more extreme tariffs were announced.
“The manufacturers had stepped up, the supply chain had done what they can, the brands had done what they can to lessen the impact,” Naude said. “Now we’ve got to start all over again. Virtually every country that supplies goods to this country is affected, and they are not small increases – they are significant increases.
“I’m not sure how long they will be in effect, but in the meantime, we don’t have a choice,” he added. “We have to do the best that we can and try to be as fair as possible. I will say this, I think it’s an unfair burden for the government to put on businesses and the consumer. I really hope they have a plan, but I’m not convinced that they do. If they do have a plan, they better announce it soon.”
Naude estimates the retail prices of some categories will skyrocket. Most wetsuits, for example, are made in Vietnam, Cambodia, and Thailand. Those countries now have tariffs of 46%, 49%, and 37%, respectively.
“You could see the price of wetsuits go up north of 50% at retail,” he said. “That’s what I mean when I say I hope the administration has a plan, because I don’t think it’s sustainable for an extended period of time.”
“There Is Some Likelihood We Will Run Out of Cash”
Luggage and travel gear brand Eagle Creek shared on LinkedIn a letter owner and CEO Travis Campbell wrote to legislators about the impact the tariffs will have on the company.
“Today, it feels like our country is systematically trying to destroy our business by skyrocketing our costs of operations while simultaneously driving down the global demand for our products via consumer anxiety and fear,” he wrote.
For more than 25 years, 95% of Eagle Creek’s goods have been made with a partner in Indonesia. As of April 1, Campbell said Eagle Creek has outstanding purchase orders for approximately $1.8 million, on which it would ordinarily pay approximately $260,000 in duties. With the new tariffs, the duties would skyrocket to $580,000, he said.
“Our business simply cannot afford this cost, particularly on the timeline required,” Campbell wrote. “There is some likelihood we will run out of cash. In the year of our 50th anniversary, we may be one less small business in America.”
Eagle Creek has frozen salary increases it had just implemented, halted the hiring of two new employees, and ended spending on vendors and travel. It has also lowered its sales forecast for the year, he said.
“So lower overall payroll, lower employment, and lower spending in the economy,” he wrote. “This doesn’t feel like the path to economic success for our country.”
“There’s No Way This Can Last”
When details emerged of just how severe the new tariffs are on Wednesday, Daniel Neukomm, the CEO of the La Jolla Group, the licensee for O’Neill Clothing, directed his team to measure everything before discussing how to mitigate the impacts.
“We need to know where everything is,” he said. “What’s on the water, what’s made but not shipped, what is ordered and not made yet, and who is the product destined for – the details matter.”
The company, like many others, had previously moved at lot of production out of China to Vietnam and Cambodia to diversify its supply chain, just like many other consumer goods companies. However, goods from Vietnam and Cambodia are now subject to 46% and 49% tariffs, respectively.
Because of the current terms with its manufacturers, Neukomm said the company should be okay with the majority of goods currently on the way or on hand, though there will be some impact that needs to be addressed. Beyond that, the company is not yet clear how the increased cost will be spread across suppliers, the company, retailers, and the consumer.
Neukomm is hoping the extreme new tariffs are a negotiating tactic by the Trump administration to wring concessions from trading partners.
If not, the consequences could be devastating for apparel and retail companies, for consumers, and for the economy, he said.
“There’s no way this can last,” Neukomm said.
U.S. Manufacturing Poses Problems
Arkansas-based LIVSN also makes all of its cut-and-sew products with partners in Vietnam.
For now, founder and CEO Andrew Gibbs-Dabney said they’ll wait until the tariffs are finalized before taking any action, which will likely mean increasing prices.
“These suppliers have access to various quality materials, a robust collection of equipment, a skilled workforce, and pay a local living wage,” he said. “Many of these things are not true of American manufacturing. If the tariffs stand at 46% or really any amount, we’ll have to raise prices to some degree. How much depends on our partnership with our suppliers and how much we can absorb before passing it on.”
Cassie Abel, the founder and CEO of Idaho-based technical apparel brand Wild Rye, said she initially wanted its products to be made in the U.S. But she and her team encountered a long list of challenges, such as poorly manufactured items, a lack of accountability, and delivery delays.
Most of Wild Rye’s products are made in China, and Abel estimates that with the additional tariffs on Chinese imports, its duties will range from 61% to 89.5%.
The brand will continue working closely with its wholesale partners, such as Christy Sports, Evo, and REI, as well as its factories and manufacturing partners to come up with solutions.
“This is all very new to me, and we don’t have a team that is totally versed in this,” Abel said. “We’re cobbling it together. Without question, we’re going to have to raise prices. We may have to decrease discounting opportunities for wholesale partners. There’s just a million levers we’re going to have to pull to survive.”
U.S. Textile Manufacturing Not an Option
Arcade cofounder and CEO Tristan Queen said the idea that textile manufacturing will come back to the U.S. is not realistic.
“For those of us in the textile business, there are no great options for manufacturing outside of Asia that don’t come with increased costs and/or decreased quality, especially U.S.-based manufacturing,” he said. “We see zero scenarios where the cost of goods doesn’t increase for the majority of brands in our industry. This will all be passed to the consumer. It’s never easy, but it’s our job to work through it confidently and with as much stability as possible.
“Sometimes our job is to look at a heap of bad options and pull the best ones,” Queen added.
“These new tariffs are a huge blow to fashion,” said Mallory Ottariano, the owner of Montana-based apparel company Youer. Youer produces all of its products in the U.S. at a facility in California, but importing textiles presents problems.
“We now only have one fabric coming out of China and it got bumped up to a 60% tariff,” Ottariano said. “What’s shocking is that this percentage is higher than if we were importing finished goods from China. Unfortunately, this specific type of fabric and finishing is not available anywhere else in the world.”
Trade Groups Speak Out Against New Tariffs
The Outdoor Industry Association decried the new tariffs Thursday, saying the outdoor industry and the economy overall will be damaged.
“These tariffs will raise costs for American manufacturers, retailers, and families,” said Kent Ebersole, president of OIA, in a statement. “That’s going to slow growth, put pressure on small and mid-sized outdoor companies, and could force some to close their doors. These tariffs also make it more difficult for global outdoor brands to operate in the U.S. and maintain their American workforce.”
Ebersole said in a recent survey, 84% of OIA members surveyed said they will be impacted by new tariffs, resulting in millions of dollars in financial losses and affecting hundreds of outdoor products.
“These rising costs could lead to fewer jobs, less innovation, and fewer options for consumers,” Ebersole said. “This will especially impact vital businesses that make American’s access to the outdoors possible.”
Snowsports Industries America (SIA), the snow industry trade group, said the new tariffs will also have significant negative impact on snow companies and consumers.
“With the majority of winter sports products manufactured outside the United States, these new tariffs are poised to significantly impact our industry,” SIA said in a statement. “While it remains unclear whether the burden will fall more heavily on brands or consumers, it is certain that these measures (and the potential for retaliatory tariffs) will create challenges for the winter sports market.”
National Retail Federation (NRF) warned that tariffs are ultimately paid by the end consumer, not foreign entities.
“Even more so, the immediate implementation of these tariffs is a massive undertaking and requires both advance notice and substantial preparation by the millions of U.S. businesses that will be directly impacted,” said NRF Executive Vice President of Government Relations David French in a statement.
“We encourage President Trump to hold trading partners accountable and restore fairness for American businesses without creating economic uncertainty and higher prices for American families.”
Risk of Recession Increases
As a result of the new tariffs and potential impact on global trade, inflation, and consumer spending, U.S. banking giant JP Morgan raised its risk of global recession to 60%, up from 40%, in a note to investors Thursday.
Jeff Glik, the CEO of Glik’s, a surf and outdoor industry customers with more than 70 stores in the U.S., said the new Trump tariff announcement is “very concerning.”
“Before this announcement, many vendors have increased prices – some dramatically while others have shouldered a large portion of the tariff,” Glik said. “At the end of the day, we will make buying decisions based on what is right for our customer. Our concern as well is U.S. consumer confidence has slumped to 12-year low. This year has headwinds but in our 128 years in business, this is not our first challenge to embrace and find ways to pivot.”
Potential for Shipping, Processing Delays
Another concern for Naude of Vissla is the potential for a major backup at the ports since tariffs will need to be collected from nearly every ship that arrives because the duties are so widespread.
“They better start hiring people,” he said. “We could see some serious delays for clearing goods, which could cause freight prices to go up.”
The good and bad news is that these new tariffs will impact everyone, even domestic manufacturers, many of whom import raw materials.
“It’s a bit sobering, but it’s somewhat of a level playing field because it’s going to affect all business and all consumers. The questions is for how long,” Naude said. “My advice would be to stay nimble, because more change is likely coming. And let’s hope that change goes the other way.”
Naude had another suggestion for retailers given that inventory prices are likely to increase even more going forward.
“If I was a retailer, I’d be buying as many at-once goods as I could afford and stockpiling them before prices go up,” he said.
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