Watch the 10 year…..
- Thread starter -lowcountrydawg
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So, Nike has their shoes made in China because labor is cheaper but the shoes are selling for $150-$200 when they get back to the US. How much does it cost to make the shoes? Is Nike passing on the savings or just selling for what they can get? If they get hit with a 50% tariff will they eat some or all of that to keep selling shoes? Will they move manufacturing back to the US? What is the benefit to Americans of all of this cheap labor?
To think there is one answer to who pays the tariffs is a mistake. If China has a 50% tariff on us and we hit them with a similar tariff they will have to look at the big picture. They sell far more into the US than we sell to them so it will cost them more. Other countries have dropped or reduced their tariffs on us. If not, then it is up to the company or exporters to decide how much they want to pass onto the US consumers. If they are now uncompetitive because of the tariffs they may cut their margins and/or look to expand in other markets.
The president has a tax plan to lower taxes to help offset the cost of tariffs as well. Ultimately he will get fairer trade deals which will help us long term or he will fail. The old system wasn’t working so something needed to change.
We have destroyed towns and families when we exported our jobs to China. The cost to these communities is incalculable. Unemployment, depression, drugs, crime…. The other part is sending the jobs to China that steals our technology and gets rich off of us while planning our destruction.
We will be doing less and less with China and it is unfortunate for those who are invested there. Those jobs can me moved to other countries like Vietnam or even back to the states. This will take time and there will be pain but this is something Trump campaigned on and is needed.
I heard a podcast last week and they claimed Nike's gross margin on shoes made in Asia is +- 70%. IDK if that is true, but I am sure it is much more than 15-20% that a domestic manufacturer would hope to make. Since they cannot raise their shoe prices to cover the tariffs it will come out of their earnings.
That's not the way to look at it. China sells FAR more to the rest of the world than the US, about 85/15. Not selling to the US is painful, but it's not detrimental.
Nike doesn’t manufacture their own products- they contract with independent companies to manufacture them. They sell the right to the importer to contract that shoe to be made….usually overseas,
The 70% figure if that is indeed the number is needed for the manufacture to pay for their overhead and to make a profit.
When it all is netted down, they probably net anywhere for 15 to 20% in profit if they are lucky.
These shoes are imported over to US companies who then sell the shoe to Walmart, etc. The importer pays these tariffs and it’s passed on as a cost to the end seller….Walmart, etc.
Which in turn is passed on to the public.
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I am glad I don't like Nike shoes; not at $200 and definitely not at $200+ tariffs.
You’re probably better off with a generic shoe as long as they are using good quality materials and the fit is good.
Not a Nike fan either, the fit is too tight - marketing has helped them as it does with most folks.
Crazy how many make money on a shoe.
You got Nike wanting money from the importer for the right to manufacturer the shoe (Nike’s specs) which is put together overseas and then shipped to the importer to sell to the retailers here. The importer not only pays Nike for their Nike emblem, they pay a tariff plus the cost of goods. Then they mark the shoe up to sell to a retailer. Then the retailer marks it up to sell to the end user.
They all have to make a profit.
If things are moved back here, more than likely the shoe would be more expensive anyway. Land, labor, etc.
Hence, the reason why I believe that Trump shouldn’t have lumped everything together the way he did. He should have been more selective imo.
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Aren’t we all? Nobody knows how this will work out but I have a good idea where we were heading under the Dems.
Perhaps, but the tariffs placed on China in 2018-2019 had little effect on pricing. Why is that?
Unless you know of something specifically, that is hard to answer. But in general, tariffs always affects pricing to the end user.
The importer pays the tariffs which is on top of the cost of the product. The importer has a set gross margin percents for all items. When their total cost goes up, so does their price to the retailers. It is dictated by the set gross margin percent.
That total cost of that product is then passed on to the retailers, their selling price to the end user goes up also. This is also dictated by set gross margin percents. It’s been this way forever.
So in other words, it creates higher prices to the consumer. If the importer or retailer didn’t adjust their prices to price increases, they would have trouble staying in business.
Well, he said “little effect”, which is actually very accurate. What you said is also true, in theory. Here is what happened with the original tariffs in practice. I work with importers and domestic factories and here is what we saw.
First, most of the tariffs were absorbed by the Chinese factories through a lowering of prices. The US importers also absorbed some as well. Ultimately, all of my importers had little to no increase in price to the distributors.
Now, with these much higher tariffs here is what I have seen. There are some price increases but nothing close to the 50% or 100% that was added. With these much higher first ones, the factories and distributors absorbed all they could to hold pricing but they couldn’t do much more.
The biggest hit is to the Chinese factories(ie-Chinese government) I know importers pausing/canceling orders left and right. Factories are calling my guys begging them to take product. They are drowning in product and they have to keep the people working or there will be riots(figuratively, but maybe literally if this goes on for too long) I am also seeing several big distributors in the US who traditionally sell Chinese product who are calling my US manufacturers because they are now considering buying US product based on price and availability.
Pretty sure what you may be seeing now is that some people bought ahead from China before all of these tariffs hit (price increases). In the past - yes, sometimes the importer and factory split the cost....but it all still eats into their bottom line, just not as much if it's shared. From my understanding, some of the China factories are not wanting to do this now (split) - could all be posturing, pretty sure they are operating on such thin margins, they can't. A 100% plus number is a big number.
Of course, the importer over here has a choice if Vietnam, Cambodia or India can provide the same. But some of these importers order out a year in advance, may be some temporary hurt.
Hopefully, the two countries will find some common ground.
Let me clarify. I was confirming what he was saying about the original tariffs and I am directly involved in all of what I discussed so it's not just "what I am seeing". Other parts of the market may have done something different but I doubt it and I have not seen it in a significant way.
The additional tariffs will pass along more of the price increase but some absorption is happening there as well but each step in the supply chain now has less room for absorption. It is having a immediate impact on the Chinese factories and real pain is happening over there. I suspect the Chinese government will be subsidizing these factories to start dumping product soon to make things look better than they are. They have to keep people working or there will be unrest.
