Band-Aids, Converse Chuck Taylor All Stars, and Trump’s Tariffs

“Show Me the Money”

I was at Walmart today looking for adhesive bandages, aka Band-Aids, the trademarked name for Johnson & Johnson’s proprietary brand. A package of 30 of their fabric bandages was about $4, and the packaging boasted that Johnson & Johnson never makes house brands for any retailer, hence if you want the real thing you must buy this brand. In much smaller type were the words, “Made in Brazil.”

I then looked at Walmart’s house brand – Equate – a box with 100 fabric adhesive bandages was about $4. I’ve purchased them before. They’re fine. “Made in USA,” the packaging touted, as well as a notation that 60 percent of materials used in their manufacture were sourced in America. This is important – lots of “Made in USA” items have mostly “globally sourced’ materials. Clearly, products made in America can be sold at a profit, just not as much profit per piece as product made abroad.

There is a lesson here. Donald Trump’s plan to fight unfair competition (where it really exists) and bring back jobs to America (if they ever come back), would have merit if all true. But American corporations have exported jobs not so much because of unfair competition but because their profits will be greater, hence dividends and/or share prices will be higher as well. And, of course, the bonuses they will receive. Many people know this, but let me give you proof that they are right.

I’m the author of a book on Converse and the eponymous Chuck Taylor All Star shoe, published by Indiana University Press. The shoes formerly were made in Lumberton, North Carolina, and Converse never lost money on the product. They were always profitable; they never were out of style. The canvas for the shoes’ uppers often were sourced in Mexico in later years, and that was because America’s textile industry already was on its death bed by the 1990s. Converse lost money on everything else they made, including fashion items; a disastrous endorsement deal with basketball player Magic Johnson (to compete with Nike’s deal with Michael Jordan); and because of an expensive research program to develop high-tech running shoes, which failed. But the Chuck Taylor All Star, their mainstay, never lost money. Nonetheless, after a bankruptcy, a private equity purchase, then a “flip” to Nike ownership, the company was resurrected. All production of the money-making All Star was moved abroad, too.

Why? Easy! Not only were the profit margins on each shoe higher abroad (in China, Vietnam and Indonesia), but the ownership could produce much more product with the same investment. I’ll keep the math simple. Say, for example, that it cost $2 per pair of shoes to manufacture the All Star in America, but only $1 per pair in Asia. Would an American company sell out American workers to make a measly $1 per pair extra? Maybe, maybe not, though sell 10 or 20 million pair in one year and it’s more than chump change. But consider this – the company can make twice as many shoes abroad in this scenario with the same investment! That’s huge. (Note: I’m not counting distribution costs, marketing costs and so on in this scenario.)

Here's more proof for any old-timers like me reading this post: I used to buy all my button-down, oxford cloth shirts and cotton chinos either at L.L. Bean or Lands’ End. This goes back decades when these items overwhelmingly were “Made in USA.” I still have two pair of chinos from Bean that I can almost fit into – a nice “military drill” to the 100 percent cotton cloth and lapped seams (i.e., stronger and more expensive). The Lands’ End shirts were 100 percent cotton, a nice weight, and held up to repeated washings.

All of the items at the above two retailers appear to be made abroad now, typically in Asia, where wagers are lower and government regulation arguably less oppressive (but investment in automation often greater, as well). The price increases I see in these retailers’ catalogs more or less matches inflation in America in recent decades, which means the original American-made products would have been as profitable as they always were had the two companies kept production at home. But they didn’t. Why not? Because the profits are so much higher on these items than they ever were, and they can get more product for the same investment. (And, savings are never passed on to the consumer. That’s a fairy tale, like the tooth fairy and Santa Claus. Companies always strive to charge what the market will bear. Period.)

I don’t think Donald Trump understands anything. He’s a thug who apparently never read a book in its entirety in his life, who thinks he can bully people like he bullied real estate investors in New York, and who thinks he’s in the same league with the heavyweights of authoritarianism like Putin and Xi Jinping, i.e., he’s a fool. Secretary of the Treasury Scott Bessent is no fool, and he makes an interesting case for tariffs, which you should study. What I’ve written above is not the whole picture, but no one is going to refute these specific points.