What's Happening?
Tapestry Inc., the parent company of Coach, is anticipating a significant financial impact due to changes in U.S. trade policy. The de minimis rule, which allowed goods valued under $800 to enter the U.S. duty-free, is set to end on August 29. This change, initiated by President Trump, is expected to reduce Tapestry's profits by approximately $53 million in the upcoming fiscal year. The company had utilized this provision to enhance its business model, similar to fast-fashion companies like Shein and Temu. Despite the financial hit, Tapestry's Chief Financial Officer Scott Roe expressed confidence in the company's agile network, suggesting that while the change requires adjustments, it is not a major disruptor to their supply chain.
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Why It's Important?
The termination of the de minimis rule represents a broader shift in U.S. trade policy under President Trump, aimed at increasing federal revenue and protecting domestic businesses. However, this policy change is likely to have a ripple effect on U.S. consumers, who may face higher prices due to increased import costs. Companies like Tapestry, which have relied on duty-free imports, will need to adapt their strategies, potentially affecting their pricing and profitability. The move underscores the ongoing trade tensions and the impact of tariffs on various sectors, including fashion and retail.
What's Next?
As the de minimis rule ends, Tapestry and other affected companies will need to reassess their supply chain strategies to mitigate the financial impact. This may involve exploring alternative sourcing options or adjusting pricing strategies to maintain profitability. The broader industry will be watching closely to see how these changes affect consumer prices and business operations. Additionally, there may be further discussions or lobbying efforts from affected companies to seek relief or adjustments in trade policies.
