The leather trade war that affects bags, boots and sofas

Boot maker Twisted X, known for its Western footwear, was thrown into chaos overnight when President Donald Trump imposed sweeping tariffs on imports in April.

The company turned a conference room at its Decatur, Texas, headquarters into a “tariff war room” when import costs for its finished work boots rose, shipments stopped in transit and invoices fluctuated so wildly that staff were forced to recalculate margins by the hour.

“Many other leather companies had to suspend shipments due to the chaos and it seemed like prices were going all over the place before you could factor in,” Twisted X CEO Prasad Reddy told CNBC. “It was a very uncertain time.”

Twisted X was not alone. Leather retailers large and small face similar challenges, and the result has been higher prices at checkout that are unlikely to come down anytime soon.

Pre-tariff inventory is gone, while replacement orders cost much more. The products now hitting shelves were made with more expensive hides, underwent more expensive foreign processing and shipped with higher freight costs than last year's goods, industry experts said.

The Yale Budget Lab projects that leather goods prices will remain elevated by nearly 22% for at least the next one to two years, driven by inflation, supply chain bottlenecks and heavy tariff exposure, particularly in China, Vietnam, Italy and India.

“The reason leather is so affected is twofold,” says John Ricco of the Budget Lab. “First of all, some of these tariff rates that are the highest apply to different countries where we import most of the leather. The second reason is that we import a lot of leather and, more generally, clothing-related products from these trading partners that we manufacture from.”

The costs have already appeared for brands like Tapestryowner of bag makers Coach and Kate Spade. Executives told investors in August that expenses related to the tariffs could total $160 million, warning that there would be “larger-than-expected earnings headwinds” ahead.

A pair of Twisted X boots start out like most American leather goods do: as raw, salted cowhide from an American ranch. That skin is sent abroad, usually to Asia, to be tanned and obtained leather. For Twisted X, about half of its products are tanned in China, up from 90% in 2017, Reddy said.

Once converted into leather, the material is typically sent to another factory (often in China, Vietnam, Mexico or India) to be cut, sewn and assembled, before ultimately returning to the United States as a finished product.

Under normal conditions, that global supply chain kept costs down. But dependence on foreign production backfired when the new tariffs came into effect, Reddy said.

“When the tariffs came up, everything stopped,” said Kerry Brozyna, president of the Leather and Hide Council of America. “Then they [China] “I couldn't receive shipments because if they received them and computed the tariff price, they couldn't sell them.”

Currently, the US leather trade deficit is one of the largest in the manufacturing sector. In 2023, the United States imported $1.37 billion worth of leather garments and exported only $92.7 million, a deficit of about 15 to 1, according to the Census Bureau. China alone supplies about a third of all leather goods imported to the US.

“Being so reliant on a lot of foreign production methods ended up hurting a lot of people in the industry in the beginning, when they didn't know exactly what was going to happen,” Reddy said. “At Twisted X we have been working to reduce dependence on China for some time.”

When the tariffs went into effect, Twisted

By the end of the summer, almost all leather companies were paying more at every stage: for hides, tanning, assembly and re-importation, according to Reddy.

“We saw all our channels to make the boots more and more expensive until we could find a good solution,” Reddy said.

Conglomerates like it Steve Madden They are also feeling the impacts.

“The third quarter was challenging, driven largely by the impact of new tariffs on goods imported into the United States,” Edward Rosenfeld, president and CEO of Steve Madden, said on an earnings call in November.

Many companies absorbed what they could, but that protection is fading, Ricco said. Despite rerouting supply chains and moving production, Twisted X said it still had to increase prices by 1% to 3% this year.

“We consider it a success,” Twisted X marketing director Tricia Mahoney told CNBC. “Many competitors were looking for bigger increases, but we made sure to put our customers first and keep prices as stable as possible. Next year could be difficult, but we are more prepared than ever.”

Luxury leather prices are already rising. Chanel's iconic Classic Flap bag is about 5% more expensive than last year, after another round of price increases this spring, according to luxury retail price data.

But by 2026, the price impact of the leather industry will likely be more prominent, Ricco said. Analysts expect prices for leather footwear and accessories to rise about 22% over the next year or two and about 7% over the long term as higher tariffs, freight costs and scarce premium pelts pass through the system.

“Probably 2026 will be the time when the rubber hits the road,” Ricco said. “They [leather companies] “We have to make these decisions about whether to pass along cost increases to consumers, whether to cut jobs and whether to reduce payouts to shareholders.”

The decline of a once-booming domestic leather manufacturing industry is also reducing the options companies have to move away from the global supply chain.

In the 1950s, manufacturers employed more than 300,000 people in about 1,000 tanneries across the country, primarily spread across the Midwest and Northeast, according to the Leather and Hide Council of America.

The workforce will have been reduced to around 50,000 by 2025, and the number of tanneries will be reduced to a few hundred, according to the council.

Reddy said the so-called golden age of domestic manufacturing has passed.

The burden of tariffs has had the biggest impact on brands that rely on finished products from Asia, not on companies that source leather domestically. So far, instead of restoring American manufacturing, as the Trump administration had planned for the tariffs, many brands have responded by reorganizing suppliers overseas to contain costs, according to industry experts.

American fur companies are also facing a shortage of raw materials, as there are simply fewer cattle hides to work with.

The U.S. cattle herd is at its smallest since the 1950s, following a prolonged drought, rising feed costs and herd liquidation. Since hides are a mandatory byproduct of dairy and beef production, fewer livestock means fewer hides, even as global demand for premium leather for handbags, upholstery and footwear persists.

“Low livestock means the skins left make it more expensive to produce boots with the high-quality leather we use,” Reddy said.

For buyers hoping for a discount when switching to a synthetic, they haven't skimped on alternatives either.

Many synthetic leather and polyurethane materials depend on petrochemical inputs from Asia, which are also included in the new tariffs. Retailers and industry analysts said synthetic footwear and handbags are seeing cost increases in the mid- to high-single digits, according to industry estimates.