Inside the leather trade war hitting handbags, boots and sofas

Boot maker Twisted

The company turned a conference room at its headquarters in Decatur, Texas, into a “tariff war room” because the cost of importing finished work boots was rising, shipments were paused mid-transit, and invoices were so volatile that staff had to recalculate margins hourly.

“Due to the disruption, many other leather companies also had to suspend shipments, and it felt like prices were fluctuating all over the place before they were taken into account,” Prasad Reddy, CEO of Twisted X, told CNBC. “It was a very uncertain time.”

Twisted X wasn’t alone. Leather retailers of all sizes are facing similar challenges, resulting in high prices at the checkout counters that are unlikely to come down anytime soon.

Pre-tariff inventory will run out and replacement orders will cost much more. Industry experts say products on shelves now are made with more expensive leather, processed in more expensive foreign countries and shipped at higher freight rates than those of last year.

The Yale Institute for Budget Studies predicts that prices for leather goods will continue to rise nearly 22% for at least the next one to two years due to inflation, supply chain bottlenecks and heavy tariffs, particularly across China, Vietnam, Italy and India.

“There are two reasons why leather has been hit so hard,” said John Rico of Budget Lab. “First, some of the highest tariffs are imposed on the various countries from which we import the most leather. The second reason is that we simply import far more leather, and more broadly apparel-related products, from these trading partners than we manufacture.”

The costs are already showing up for brands such as: tapestryOwner of handbag manufacturers Coach and Kate Spade. Executives told investors in August that tariff-related costs could total $160 million and warned that there could be “more headwinds to earnings than previously expected” going forward.

Twisted The hides are shipped overseas, usually to Asia, and tanned into leather. For Twisted X, about half of its products are tanned in China, down from 90% in 2017, Reddy said.

The material converted into leather is typically transported to another factory (often in China, Vietnam, Mexico, or India) where it is cut, sewn, assembled, and finally returned to the United States as a finished product.

Under normal circumstances, its global supply chain kept costs low. But the reliance on overseas production backfired when new tariffs took effect, Reddy said.

“Once the tariffs hit, everything stopped,” said Kelly Brozina, president of the Leather and Leather Council of America. “So they [China] I was unable to collect the package because once the customs price was calculated after the package was collected, it could not be sold. ”

Currently, the US leather trade deficit is one of the largest in the manufacturing industry. According to the Census Bureau, the U.S. imported $1.37 billion in leather clothing in 2023, but exported just $92.7 million, a roughly 15-to-1 deficit. China alone supplies approximately one-third of the leather products imported into the United States.

“Being too reliant on a lot of foreign production methods hurt a lot of people in the industry at the beginning when we didn’t know exactly what was going to happen,” Reddy said. “At Twisted X, we have been working for some time to reduce our dependence on China.”

Once the tariffs went into effect, Twisted

By the end of the summer, Reddy said, nearly all leather companies were paying more for every step of the way, including raw hides, tanning, assembly and re-importing.

“We saw all the routes to making boots keep getting more expensive until we found a good solution,” Reddy said.

like a conglomerate steve madden are also feeling the impact.

“The third quarter was a challenging one due to the significant impact of new tariffs on imports to the United States,” Steve Madden Chairman and CEO Edward Rosenfeld said in a November earnings call.

Many companies absorbed what they could, but that buffer is disappearing, Rico said. Despite rerouting its supply chain and relocating production, Twisted

“We consider this a success,” Tricia Mahoney, Twisted X’s chief marketing officer, told CNBC. “While many of our competitors were considering larger price increases, we decided to prioritize our customers and keep our prices as stable as possible. The next year may be tough, but we are more prepared than ever.”

The price of high-quality leather has already skyrocketed. According to luxury retail price data, Chanel’s iconic Classic Flap Bag is now worth about 5% more than last year, thanks to further price increases this spring.

However, by 2026, price shocks in the leather industry are likely to become even more pronounced, Rico said. Analysts expect prices for leather footwear and accessories to rise by about 22% in the next one to two years, and by about 7% over the long term, due to higher customs duties, shipping costs and rare premium leathers.

“2026 will probably be the year when rubber meets road,” Rico said. “They are [leather companies] Decisions must be made about whether to pass on increased costs to consumers, whether to cut jobs, and whether to reduce payments to shareholders. ”

The decline of Japan’s once-booming leather manufacturing industry is also limiting companies’ options to pivot away from global supply chains.

In the 1950s, manufacturers employed more than 300,000 people in about 1,000 tanneries across the United States, primarily in the Midwest and Northeast, according to the U.S. Leather and Leather Council.

According to the council, the workforce will fall to around 50,000 people by 2025, and the number of tanneries will drop to a few hundred.

Reddy said the so-called golden age of domestic manufacturing is long gone.

The burden of tariffs has hit hardest on brands that rely on finished goods from Asia, rather than companies that source leather domestically. So far, many brands have responded by restructuring overseas suppliers to contain costs, rather than restoring U.S. manufacturing, as the Trump administration had assumed the tariffs would be.

U.S. leather companies are also facing a raw material shortage because they are simply handling fewer cow hides.

The U.S. cattle herd is at its lowest level since the 1950s due to prolonged drought, rising feed prices and herd consolidation. Leather is an essential by-product of dairy and beef production, so fewer cows means less leather, even as global demand continues for the finest leather for handbags, upholstery and footwear.

“Less cow numbers mean that any leftover hides make it more expensive to make boots with the high-quality leather we use,” Mr Reddy said.

There are also alternatives available for shoppers looking to trade in synthetic fabrics and get a discount.

Many synthetic leather and polyurethane materials rely on petrochemical raw materials sourced from Asia, which will also be subject to the new tariff schedule. Retailers and industry analysts said the cost of synthetic leather footwear and handbags is rising in the mid-to-high single digits, according to industry estimates.