Why New Balance turned on Trump over China tariffs

Washington(CNN Business) American sneaker company New Balance welcomed President Donald Trump's tough trade stance in 2016 -- but now the athletic footwear manufacturer is strongly opposing the President's latest threat to expand tariffs on China.

New Balance boasts that it's the only major company to make more than four million pairs of athletic shoes a year domestically. It has five New England factories, with one more expected to open next year. The catch? It needs to import component parts from China that are no longer made in the United States.

"The proposed Tranche 4 tariffs will risk our company's overall financial health, which will in turn limit our ability to maintain and reinvest in our American factories," said a letter submitted by New Balance to the US Trade Representative's Office ahead of a hearing next week.

It's just one example of how many American corporations have built supply chains that span the globe, and why Trump's protectionist trade policies won't work to bring manufacturing back to the United States. It's just too hard to ding China without hurting American companies, workers and consumers along the way.

New Balance will join a chorus of opposition to a proposed new round of tariffs on Chinese goods at hearings this week. More than 300 company executives and trade group officials are scheduled to testify, from industries ranging from apparel and toys to fishing and fireworks.

Until now, New Balance has focused on fighting efforts to open up trade. The company fought the Trans-Pacific Partnership trade agreement, which would have phased out tariffs on shoes coming from Vietnam.

Shortly after Trump was elected, the company's vice president of public affairs, Matt LeBretton, said that "things are going to move in the right direction" with Trump as president, adding that the Obama administration had "turned a deaf ear" to New Balance in regards to the Trans-Pacific Partnership.

The comments sparked immediate outcry, and some customers burned their New Balance sneakers in protest over the comments. Trump withdrew from the massive free trade deal as one of his first acts as president.

Now New Balance, which has fought counterfeit operations in China for years, says Trump's tariffs -- which Trump has argued will get China to agree to favorable terms in a new trade deal -- won't help the challenges it faces from abroad.

"Punitive tariffs on imports of footwear components from China will not further these important objectives, but they will threaten our ability to continue manufacturing and investing in our US footwear factories," Monica Gorman, New Balance's vice president of global compliance, is expected to say at the hearing, said the letter sent to the US Trade Representative's Office.

New Balance did not respond to calls from CNN for this story.

Trump put a first round of tariffs on $50 billion of Chinese-made goods nearly a year ago, amid negotiations for a broader trade deal that would address issues over intellectual property theft and forced technology transfers.

But the two countries have yet to strike a deal and Trump continues to use tariffs as a negotiating tactic. He put a 10% tariff on another $200 billion of Chinese goods in September, and then escalated the duty rate to 25% in May. Now, he's considering imposing tariffs on an additional $300 billion of Chinese-made goods, which would effectively put a tariff on all imports coming in from China.

Last week, more than 600 companies and industry trade associations-- including Walmart, Costco, Target, Gap, Levi Strauss and Foot Locker -- wrote to the White House urging Trump to remove levies on China and end the ongoing trade war.

Footwear groups say that new tariffs won't bring back the suppliers of uppers (the part around your foot), soles or inserts. The US footwear industry produces just 25 million pairs of shoes a year, while importing 2.5 billion, despite existing tariffs on foreign-made shoes and materials.

"It will not happen. We've had high duty rates for 90 years and production still left," said Matt Priest, president and CEO of the Footwear Distributors and Retailers of America, which has opposed Trump's tariffs.