Dubroff: Tariffs could crush this footwear star
Haley Pavone has spent the past seven years building San Luis Obispo-based Pashion Footwear into one of the region’s fastest-growing companies.
The Cal Poly graduate built a global supply chain and raised capital on her own, even turning down an offer from Kevin O’Leary on Shark Tank. But just as her convertible shoes are hitting a higher revenue threshold, the trade war is threatening Pashion’s very existence.
The tariffs proposed by the Trump Administration “would put my import rate up to 150%,” she told me over the phone on April 7. “I don’t even know what that means.”
Undaunted by the turbulent few days after the April 3 tariff announcement, Pavone said that “part of me is optimistic” that the threat will pass. “But I can’t afford to assume it’s not going to happen and look like a fool. It’s a very weird place for everyone I’m talking to.”
What’s obvious but also missing in the tariff debate is the reality that even under the best circumstances, it would take years to build a factory for her heels-to-flats convertible shoe technology. And thousands of hours to train workers to the skill levels she sees every day at the factory in China that does her production.
To complicate things, she imports into Canada and warehouses her products there, taking advantage of the USA-Canada-Mexico free trade agreement reached in the first Trump Administration.
In May, those duty-free shipments will become subject to new levies, with the suspension of so-called “Section 321” rules for “de minimus products with a stated value of less than $800. “Section 321 is getting lost in the media narrative,” she said.
Pavone is finding friends in unexpected places. Shark Tank judge and billionaire investor Mark Cuban, a tariff critic, shared a TikTok video Pavone made to his millions of X followers. The result was an encouraging outpouring of support, she said. “The exposure has opened a lot of doors.”
The bottom line for Pavone is that very large companies facing a tariff hit have reserves, large credit lines or multiple sourcing options that allow them to absorb the blow.
But small businesses are left in the lurch. “It’s a disproportionate attack,” she said, “most small businesses don’t have the cash cushion to ride this out.”
Among those who understand the impacts caused by the abrupt increase in tariffs is JPMorgan Chase CEO Jamie Dimon who wrote in his annual letter to shareholders on April 7 that “the recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession.”
Later in his letter, he acknowledged the often-overlooked impact of smaller companies on the economy.
“We could do a better job supporting small businesses,” he wrote.
I heard similar comments from Fed Chair Jerome Powell on April 4 when he talked to a group of business journalists at our annual conference in Washington, D.C. Powell cited the uncertainty surrounding a new administration that’s trying to address “trade, fiscal, immigration and regulation” in a very short time frame.
While the Fed will be “waiting for greater clarity,” he warned about the “damaging and painful effects” of higher prices on the economy if the trade war goes on for an extended period. Although he said it’s a “solid economy,” he added that “uncertainty is weighing on people.”
From the Central Coast perspective, and across the nation, it’s the uncertainty that is freaking out a generation of entrepreneurs who have battled the financial crisis, COVID-19, and countless natural disasters and created the world’s strongest economy.
It does seem fundamentally unfair that the tariff formula doesn’t have a carve-out for smaller companies who have followed the rules for creating, making and distributing products in the 21st Century.
Excesses shoe or textile manufacturing capacity and a surplus of skilled workers haven’t existed in the U.S. since mills began leaving the South in the 1980s.
Meanwhile, companies like Pashion pay taxes on goods they sell and if they go out of business there’s a loss of jobs and revenue.
“I’ve had to learn this industry inside and out. It’s been trial by fire.” Pavone said. “What is the motivation for revoking policies that make it possible.”
Henry Dubroff is the founder, owner and editor of the Pacific Coast Business Times. He can be reached at [email protected].
