A story in The New York Times about a U.S shoe company and its challenges with tariffs after having located production in Brazil underscores the crushing impact of the current situation on a small company.
Having moved to Brazil to maximize production and control costs, the company is now saddled with a 50 percent tariff that is likely to affect the ability of the company to keep producing. According to the company owner, they already work on a tight margin, and the increase costs may wipe out their profitability. According to various resources, gross margins in the shoe business are 20-40 percent, with net margins significantly lower.
This company is unable to relocate production, but we’ve been talking to people in the toy industry, and one of the strategies several are following is to diversify production to be able to respond to what can only be called a fluid situation with respect to tariffs.
The ability to source goods for the U.S. from different countries based on tariffs is an increasingly employed strategy. Still, it’s not without its own set of difficulties.
What we know so far has been that 2025 has been the year of “the scramble and the pivot” as manufacturers have tried to stay one step ahead of a shifting environment. With the increase of duties on Chinese goods postponed now until November 10, Q4 goods will make it in under the wire, so to speak. However, the outlook for 2026 is unknown.
We expect that pricing will be a major topic of discussion during the LA Fall Preview in September. During Sweet Suite last month, I caught up with Josh Loerzel of Sky Castle, and he shared his company’s strategy for trying to negotiate the current conditions.
