New US tariffs starting in April 2025 are causing global leather industry costs to skyrocket, driving up shoe and handbag prices and making it difficult for them to cool down in the next one to two years.

The new wave of tariffs imposed by US President Donald Trump starting in April 2025 is having far-reaching impacts on the global leather industry – from shoes and handbags to fashion accessories. The direct consequence is a sharp increase in retail prices, while the prospect of a slowdown is unlikely for at least the next one to two years.

A prime example is Twisted X, a brand of cowboy-style leather shoes from the American West. Immediately after the new tariffs took effect, the company was forced to set up a "tariff war room" at its Texas headquarters to cope with wildly fluctuating import costs, goods stuck in transit, and profit margins changing by the hour.

However, Twisted X is not an isolated case. In the US market, from small retailers to giants like Tapestry – the group that owns Coach and Kate Spade – are all struggling with escalating costs. Tapestry warned that tariff-related costs could reach $160 million, creating a “greater drag on profits than expected” in the coming quarters. According to industry experts, pre-tariff inventory has been depleted, while replacement orders are significantly more expensive: raw leather is more costly, overseas processing costs have increased, and shipping fees have escalated.

According to estimates from the Yale Budget Lab, prices for leather products could remain nearly 22% higher for at least the next one to two years. This is due to the combined effects of inflation, supply chain bottlenecks, and significant tariff exposure, particularly in global manufacturing hubs such as China, Italy, and India.

John Ricco, an expert at Yale Budget Lab, believes the leather industry has been severely impacted for two main reasons. First, the US has imposed the highest tariffs on countries that are key suppliers of leather and leather products. Second, the US market itself is heavily dependent on imported leather and apparel, while domestic production capacity has declined significantly.

In reality, the US leather goods trade deficit is very high. In 2023, the US imported approximately $1.37 billion worth of leather apparel but only exported $92.7 million – a difference of nearly 15:1. China alone currently supplies about one-third of the total leather products imported into the US.

The global leather industry's supply chain clearly reflects its vulnerability to policy shocks. A pair of "Made in USA" leather shoes typically begins with raw cowhide from American farms, then is shipped to Asia for tanning, and then further transported to China, Mexico, or India for cutting, sewing, and assembly, before returning to the United States as a finished product.

Under normal circumstances, this model helps optimize costs. But when tariffs are imposed, dependence on foreign production quickly becomes a burden for American businesses themselves.

As many companies withdraw from China to avoid tariffs, they face new problems: congestion of goods in alternative markets, extended delivery times, and especially the shock of new tariffs – including tariffs of up to 50% on many leather products imported from India, starting in August 2025.

As a result, by the end of this summer, almost every stage in the leather industry's value chain has seen increased costs, from raw materials, tanning, processing to re-import.

In the short term, many businesses try to absorb costs to retain customers. Twisted X has only increased prices by about 1-3% this year – a level that company management considers a relative success. However, this "cushion" is rapidly thinning.

In the high-end segment, prices have increased significantly. For example, Chanel's Classic Flap bag is now about 5% more expensive than it was in 2024, after several consecutive price adjustments.

Analysts predict that 2026 will be the year when price pressures become most apparent. Prices for shoes and leather accessories could increase by around 22% in the next 1–2 years and remain higher by about 7% in the long term.

In reality, instead of restoring domestic production as initially hoped by the Trump administration, tariffs are forcing businesses to rearrange their global supply chains to minimize losses. Meanwhile, American and global consumers are facing a new, higher price level – not only for genuine leather goods but also for substitute products.

With overlapping impacts from tariffs, raw material shortages, and declining domestic production capacity, the prospect of "affordable prices returning" for leather shoes, bags, and other leather fashion products seems very far off.

Source: VTV

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