The latest tariff rate reduction on products from China are a reprieve, but they’re still too high – and ongoing trade policy uncertainty is making it difficult to plan, forecast, budget and strategize for the future, according to surf and outdoor brand leaders.
“Yes, 30% is better than 145%,” said Paul Naude, CEO of Vissla, about the news that recent tariff increases would be reduced for a 90-day period. “But it’s still the highest tariff in our lifetime.”
The tariff cut makes is possible to bring goods in now, but 30% tariffs on goods from China and the 10% on other countries means it’s still going to be an inflationary market, he said.
Freight Cost Surges, Delivery Timelines Likely to be Delayed
Naude also expects freight charges to surge as companies scramble to get goods out of China after everything had been on pause for six weeks.
And because everything had been on pause, it’s going to take time to clear through the backlog of containers that need to be shipped, production to ramp up again in some factories, and containers to start moving around the world.
“I think we can still expect a disrupted late summer, early fall season,” he said. “Everything has been essentially frozen for six weeks. There’s just going to be knock on effects. The consumers haven’t felt it yet, but they will in about two to four weeks.”
At Vissla, the company plans to monitor how quickly goods can get out of China, and if the timeline is too long, they might not be able to bring in 100% of orders and may hold some goods there until later in the year or into next year, so as not to have too much late inventory.
Essentially, it is it a waiting game for companies to see when they can get goods out of China, and how consumers will react to higher prices once goods do arrive.
New Tariff Rate Still a Cash Flow Nightmare
Bob Gundram, CEO, of C3 Worldwide, the owner of Capita Snowboards, Union Bindings, and Coal Headwear, said the new 30% tariff rate does not tell the whole story.
C3 has a factory in Austria to manufacture Capita snowboards and in Italy and China for Union bindings and boots.
With the U.S. and China announcement on Monday, one category C3 imports from China now has a 40% duty because of a preexisting tariffs plus the 30%, and another has a 62% duty.
That’s just a cash flow killer, Gundram said.
“Let’s look at how this works for a small, $5 million winter sports business in the U.S. They might have a $1 million credit line with their bank. Now they have to come up with an additional $1 million to get the product into their warehouse. Good luck with that!
“Now imagine what that looks like for a $200 million dollar company. We are talking up to $50 million dollars in additional tariffs,” he said.
Some companies just don’t have that kind of money, even with the reduction announced Monday. And those that can raise the money to pay the tariffs will have to increase prices for retail partners, and thus consumers.
“Let’s also not forget that we still have increased tariffs from over 150 other counties – EU for skis, snowboards and ski boots, Vietnam for apparel and outerwear, etc.” Gundram said. “So no matter what you buy, when tariffs go up, retail pricing goes up.”
Imports Still Expected to Fall
Port of Los Angeles Executive Director Gene Seroka said he doesn’t expect a surge of imports after the base tariff rate on goods from China was slashed to 30% from 145% for 90 days as negotiations continue.
“Even at a 30% tariff with a 90-day reprieve, it’s not going to dramatically change what we’re seeing right now,” Seroka said in an interview with The Wall Street Journal.
Many companies brought in extra inventory earlier this year to get ahead of new tariffs and have more recently paused and canceled new orders. Seroka said he expects import volume to the Port of L.A. to end May down 25% year-over-year.
Prices Still Increasing
Cassie Abel, the founder and CEO of Idaho-based outdoor apparel brand Wild Rye, said the company will still need to raise prices for its FW25 collection.
“We have done all our forecasting and analysis based on a 50-60% duty rate because there was no way to set pricing with 145% duties (at least not prices anyone would pay),” Abel said. “Given the increase in shipping costs, we anticipate these numbers will still be close to accurate.”
Abel estimates that it has cost upwards of $150,000 to manage trade policy shifts, including shipping, travel, and samples they’ve sent around the world to try to source from outside of China. Those efforts have also stalled new development for future seasons.
Uncertainty Remains
The 90-day reprieve just signals more uncertainty, Abel said, which makes planning impossible.
“The uncertainty is what’s killing businesses right now,” she said. “I’m grateful for a slight reprieve in duties, but a 90-day pause leads to all sorts of other concerns. Knowing that this is self-inflicted by our government continues to make my blood boil.”
Outdoor, footwear, and sporting goods industry consultant Matt Powell, a senior advisor at BCE Consulting, agrees that the uncertainty for businesses is sky high and companies are likely to remain cautious with their expense and hiring plans despite the 90-day reduction in tariffs to 30%.
“I think everybody’s just going to keep their foot on the brake here until we get to a hard number,” he said.
“I still feel like we have no idea where we are except for the 90 days it’s going to be a 30%,” he said. “But if it goes down to 10 at the end of that period or it goes up to 80, how can you run your business like this?”
Jon Lane, the CEO at Passenger, a U.K.-based outdoor apparel brand that paused its U.S. business earlier this year because of the unpredictable and high tariff rates, said the company is still awaiting certainty and confidence.
“Our sourcing mix contains China as well as other countries impacted by the tariffs,” Lane said. “Once we have clear certainty on what the tariffs will be across the board and certainty that they are not going to change suddenly again, then we will feel confident in our way forward.”
Importing Product Without a Complete Loss
Mike Mojica, the co-founder and CEO of Colorado-based outdoor gear brand Outdoor Element, said the tariff reduction means the brand can feasibly import product without taking a complete loss with each order the company fills. That’s a relief for the brand, which paused production earlier this year.
“However we need to remember these are still additional tariffs that are added to our standard tariffs for imports,” Mojica said. “If a business was paying 4-7% tariffs for imports, we are now faced with 37%.”
In the past, some of Outdoor Element’s products qualified for an exclusion under the Section 301 punitive tariffs that President Donald Trump imposed back in March 2018, he said. Now, the new tariffs are a blanket policy and thus poses a new challenge to navigate, he said.
Mojica said the company is still planning to move some of its manufacturing to Vietnam, the U.S., and some will remain in China. He is also looking into air-shipping product so that the company can fill its forecasted wholesale accounts. Margins will be thinner, but it means the company can maintain its wholesale relationships.
“Overall this is the right direction and I am happy that both countries are coming together to create a working relationship,” Mojica said. “We believe this will eventually end in a better economic global environment. Participating in a global market benefits all, because global commerce promotes peace.”
Costly Back-to-School Season Expected
The American Apparel & Footwear Association warned that despite the reprieve, prices will still be higher come September.
“The 90-day pause is welcome and may temporarily help unstick the effective trade embargo that has been in place with respect to U.S./China trade since April 9,” said AAFA President and CEO Steve Lamar in a statement.
“Sadly, the residual 30 percent tariff, stacked on top of the existing Section 301 and ‘most favored nation’ (MFN) tariffs, will still make for an expensive back to school and holiday season for most Americans. If freight rates spike due to the tariff-induced shipping disruptions — which will take months to unwind — we could see costs and prices creep up even further. What’s needed now is a long-term deal — not just with China but with all our trading partners — so we can predictably make long term trade, investment, and sourcing decisions.”
A Step in the Right Direction
Brad Alband, the owner of Autumn headwear and outerwear, Corduroy headwear, and Know Bad Daze Studios, is glad the reduction to 30% on goods from China is at least leading to some movement.
“It’s a step in the right direction,” he said. “It keeps the balls in the air, from current production to future development – it alleviates the stalled feeling. Thirty percent still impacts our cost of goods and our wholesale/retail pricing, but at least it’s workable if all of our partners from manufacturing to retailers understand 2025/2026 will not look like 2024/2025.”
Alband said he heard from the three Chinese factories he works with on Monday after the reduction to 30% was announced, and he’s optimistic orders will arrive on time now.
“We usually land all goods in August for September deliveries so I’m hoping the supply chain is a little more ironed out by then,” he said.
Time to Scramble Again
For the La Jolla Group, the licensee for O’Neill Clothing, the immediate effect of the reduction to 30% means “it is another scramble exercise to understand the impact and then again to see where we can and should take risks, which are the same decisions manufacturer and our retailers are going through as well,” CEO Daniel Neukomm said.
“We are doing our best to make responsible decisions while defaulting to scarcity,” he said about the status of fall goods. “This doesn’t change our stance on being (cautious) with inventory.”
And trying to figure out how to adjust pricing remains a challenge with so many moving pieces, Neukomm said.
“We are being thoughtful about what the market will bear versus simply pushing the entirety of (the increased) costs to our suppliers and retailers,” he said. “All stakeholders, including the end consumer, will ultimately inform pricing strategy.”
The bottom line for Neukomm is the same as it was in early April, when the Trump administration first announced the “Liberation Day” tariffs.
“This level of uncertainty simply cannot last,” Neukomm said on Monday. “All businesses need to make short, medium , and long term decisions consistently and simultaneously. The current conditions despite temporary relief does not allow for that dynamic yet.”
