Inside the leather trade war hits handbags, shoes and sofas

Bootmaker Twisted

The company turned a conference room at its Decatur, Texas, headquarters into a “tariff war room” as import costs on off-the-shelf work boots rose, shipments paused mid-transit, and invoices fluctuated so wildly that employees found themselves recalculating margins by the hour.

“A lot of other leather companies had to pause shipments because of the chaos, and it felt like prices were going up everywhere before they could take it into account,” Prasad Reddy, CEO of Twisted X, told CNBC. “It was a very uncertain time.”

Twisted X wasn’t alone. Leather retailers, large and small, are facing similar challenges, and the result has been that prices are at record highs and unlikely to come down any time soon.

Pre-tariff stocks have run out, while the cost of replacement orders is much higher. Industry experts said the products hitting shelves now were made with more expensive hides, underwent more expensive foreign processing and were shipped at higher shipping costs than last year’s merchandise.

The Yale Budget Lab expects prices for leather goods to remain about 22% higher over at least the next year or two, driven by inflation, supply chain bottlenecks and exposure to heavy tariffs, especially across China, Vietnam, Italy and India.

“The reason skin takes a hit so hard is two-fold,” said John Rico of Budget Lab. “No. 1, some of the higher tariff rates are imposed on different countries where we import the most leather. The second reason is that we import a lot more leather and, more broadly, apparel-related products from those trading partners than we do.”

The costs have already become apparent for brands like textureowner of handbag makers Coach and Kate Spade. Executives told investors in August that tariff-related expenses could total $160 million, warning of “larger than previously expected earnings headwinds” ahead.

A pair of Twisted This hide is shipped overseas, usually to Asia, to be tanned and turned into hides. For Twisted

Once the material is turned into leather, it is usually shipped to another factory — often in China, Vietnam, Mexico, or India — to be cut, sewn, and assembled, before finally returning to the United States as a finished product.

Under normal circumstances, the global supply chain kept those costs low. Reliance on foreign production backfired when the new duties came into effect, Reddy said.

“When the tariffs happened, everything stopped,” said Kerry Brozina, president of the American Leather and Leather Council. “That’s how they are [China] “They couldn’t receive the shipments because if they received them and calculated the tariff price, they wouldn’t be able to sell them.”

Currently, the US leather trade deficit is one of the largest in manufacturing. In 2023, the United States imported $1.37 billion worth of leather clothing while exporting 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 United States

“The heavy reliance on many offshore production methods hurt a lot of people in the industry at first 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.”

As the tariffs took effect, Twisted

By late summer, almost every leather company was paying more at every stage — for hides, tanning, assembly and re-importation, according to Reddy.

“We saw all our channels to make shoes get more expensive until we were able to come up with a good solution,” Reddy said.

Clusters such as Steve Madden They also feel the effects.

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

Many companies have absorbed what they can, but that reserve is disappearing, Rico said. Despite redirecting supply chains and relocating production, Twisted X said it will still have to raise prices by about 1% to 3% this year.

“We look at it as a success,” Tricia Mahoney, Twisted X’s chief marketing officer, told CNBC. “Many competitors were eyeing larger increases, but we made sure to prioritize our customers and keep prices as stable as possible. Next year may be difficult but we are more prepared than ever.”

Indeed, the prices of luxury leather have risen. Chanel’s signature Classic Flap bag is 5% more expensive than it was last year, after another round of price hikes this spring, according to luxury retail price data.

But by 2026, the price shock in the leather industry is likely to be more pronounced, Rico said. Analysts expect prices for leather shoes and accessories to rise about 22% over the next year or two and about 7% over the long term as higher tariffs, shipping costs and scarcer leather move through the system.

“2026 will probably be where the rubber meets the road,” Rico said. “they [leather companies] We have to make these decisions about whether to pass on cost increases to consumers, whether to cut jobs and whether to reduce payments to shareholders.

The decline of the once-thriving local leather manufacturing industry is also reducing the options for companies to move away from the global supply chain.

In the 1950s, manufacturers employed more than 300,000 people at nearly 1,000 tanneries across the country, spread mainly throughout the Midwest and Northeast, according to the U.S. Leather and Leather Council.

The workforce falls to about 50,000 in 2025, with the number of tanneries dwindling to a few hundred, according to the council.

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

The burden of tariffs has had the greatest impact on brands that rely on finished goods from Asia – not companies that source leather locally. So far, instead of restoring U.S. manufacturing, as the Trump administration has invoked the tariffs, many brands have responded by rearranging overseas suppliers to contain costs, according to industry experts.

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

The U.S. cattle herd has reached its smallest point since the 1950s after a long drought, high feed costs and herd thinning. Since leather is an obligatory byproduct of dairy and beef production, fewer livestock means fewer hides – even as global demand for high-quality leather for handbags, upholstery and shoes continues.

“The lack of livestock means that the remaining hides make it more expensive to produce the high-quality leather shoes we use,” Reddy said.

For shoppers hoping to get a discount by substituting for synthetic materials, alternatives are also not provided.

Many synthetic leather and PU materials rely on petrochemical inputs sourced from Asia, which also fall within the new tariff schedules. Retailers and industry analysts said synthetic shoes and handbags are seeing moderate to high cost increases, according to industry estimates.