New design

Corporate America, or rather those that primarily source their supply chain outside of America, are preparing for some significant changes coming down the pipeline. President-elect Donald Trump is expected to go through with his campaign promise to hike tariffs as high as 60% to 100% on goods from China, and 10% to 20% on all other imports. Some companies have already made contingency plans, but others are now scrambling to adjust their business models to that new reality.

Snapshot: On an earnings call on Thursday, Steve Madden (SHOO) announced it was “planning for a potential scenario in which we would have to move goods out of China more quickly.” The footwear maker has been developing factories in other countries like Cambodia, Vietnam, Mexico and Brazil, but imports to the U.S. still account for about two-thirds of its business. Should it diversify, or move production closer to home, it can help secure the firm’s supply chain and leave it less exposed to risks and uncertainty under the coming administration.

“Our goal over the next year is to reduce that percentage of goods that we sourced from China by approximately 40% to 45%,” Steve Madden CEO Edward Rosenfeld declared. “If we’re able to achieve that – and we think we have the plan to do it – a year from today, we would be looking at just over a quarter of our business that would be subject to potential tariffs on Chinese goods.” Investors seemed to like the restructured model and raised guidance, sending Steve Madden (SHOO) shares up 3.1% to $45.60.

What it means: Economists and analysts have intensely debated what a new tariff regime will mean for the broader economy, with topics surrounding the supply chain, inflation, consumer costs and domestic manufacturing. The one thing that seems pretty clear, though, is that it is set to happen and companies must prepare for it. “To me, the most beautiful word in the dictionary is ‘tariff,'” Trump recently said at the Economic Club of Chicago. “It is for the protection of the companies that we have here. The higher the tariff, the more likely it is for a company to come into the United States and build a factory in the United States.”