Matt Priest, president and CEO of Footwear Distributors of America (FDRA) told FN on Wednesday that “now’s the time for footwear companies to diversify their production and look for options outside of China,” as tensions between the U.S. and China reach an all-time high.
“It’s hard to imagine a time where the relationship between the two countries have been more fraught with risk, at least in our lifetimes,” Priest said. “It all started with the Trump administration pushing back very openly about China’s role in a variety of different economic environments. While former President Trump wasn’t unique in his criticism of China’s engagement with the world, it did lead to the tariffs we are still dealing with today.”
More recently, the Biden administration has said the U.S. is in competition with China and restricted American businesses from working with Chinese partners on high-end semiconductors, while former Speaker of the House Nancy Pelosi’s visit to Taiwan in August further drew Beijing’s ire.
Tensions hit an even higher fever pitch earlier this year when the U.S. shot down a Chinese-operated high-altitude balloon off the coast of South Carolina and speculation of China possibly assisting Russia in its invasion of Ukraine has spurred even further tensions between the two countries.
Now, Priest said, all eyes are on a bipartisan committee in the House of Representatives investigating the numerous technological, economic and military threats from the Chinese Communist Party.
The committee, which met for the first time last week, is the “only true bipartisan effort” happening on the Hill right now, Priest told FN. “The first hearing was a potpourri of all the concerns the U.S. government has around our relationship with China. It covered everything from flow of illicit Chinese fentanyl into American communities to TikTok, China trade policy, state secrets and the balloon incident.”
But ultimately, no active negotiations on a phase two agreement or the reduction of tariffs are on the table at this point, Priest said. “We’re in an environment where the relationship is not going to get better anytime soon, it probably will get worse,” Priest admitted. “And as someone recently said, to me, the U.S. and China are still looking for the bottom of how far the relationship can go down.”
And now that the two countries have gotten to this point, Priest is advising his members to look elsewhere for their production needs. “Almost 60 percent of our volume still comes from China,” Priest noted. “While this is a low for footwear over the last few decades, our industry still relies heavily on China.”
Priest added that he is encouraging FDRA members to “strategically think about supply diversification” while also setting long term goals and navigating away from China as best they can.
Many members who have shifted away from China are looking to Vietnam to fulfill their needs, while Cambodia and Indonesia are also options. “Our industry is a slow-moving aircraft carrier, and it takes time to pivot,” the CEO said. “Now’s the time to find new factories, figure out pricing and quality control, and be able to move production if things between the U.S. and China get worse.”