Gimmi Baldinini, head of the eponymous Italian shoe firm, told journalists earlier this week that he had opened a bottle of champagne after Donald Trump's unexpected victory in the U.S. presidential elections.
Like many other shoe manufacturers in the Marche region of Italy, Baldinini depends a lot on exports to Russia, in spite of their recent geographical diversification efforts, but low oil prices and the international sanctions against trade with Vladimir Putin's regime have led to a drastic reduction in their sales to the country. Orders taken by Italian manufacturers of high-end footwear at last month's Obuv Mir Kozhi fair in Moscow were down by between 30 and 50 percent, and attendance at the fair fell by 20 percent.
Praising Putin for his strong leadership, Trump has indicated that he would be in favor of dropping the sanctions imposed on Russia because of its invasion of Crimea and its aggressions in Ukraine. European government leaders were expected to renew the sanctions for another six months at a meeting next month, although they have negatively affected their exports to Russia, but analysts feel that Trump's backing of Putin may lead to drop them sooner or later. A unanimous vote by the 28 member states of the European Union is required for the sanctions to go on.
The repeal of the sanctions was on the list of the requests made last Friday to the Italian Parliament by Annarita Pilotti, president of Assocalzaturifici, the Italian shoe industry association. She also repeated her association's demands for mandatory labels of origin on shoes imported into the EU, fiscal exemptions for R&D investments and more support from the banking system (more about her presentation in our next issue).
One thing that is almost certain is that the Trans-Pacific Partnership (TPP) between the U.S. and 12 Asian countries will not materialize, to the benefit of China. However, Trump's warning that he may impose duties of 45 percent on Chinese products raises the specter of a potential trade war with the biggest source of imported footwear for his country.
We believe that this is unlikely because of the potential inflationary effects. Trump is viewed as an unpredictable leader, but the American system of checks and balances, where the Congress has its say on almost any important decision, will likely soften his stance.
The TPP had been ferociously opposed by Mexican shoemakers, but they may get hurt even more by Trump's threat that it will repeal the North American Free Trade Agreement (Nafta) and charge duties of 35 percent on imports from Mexico. We believe that the new U.S. administration will use these threats as a tactic to try to obtain better conditions with Mexico, especially with regard to immigration.
As part of his populist anti-globalization drive, the American president-elect has also called for the U.S. to withdraw from the World Trade Organization (WTO), but this issue looks even more complicated. On the other hand, it seems uncertain that he and the Republican Congress will ever bow to the European governments' requests for more balanced conditions in the negotiations of a Transatlantic Trade and Investment Partnership (TTIP), the planned free trade agreement with the European Union. A British commentator said that Trump is more likely to go for a post-Brexit bilateral pact just with the U.K.
For European shoemakers, the TTIP would open wider the door to the U.S., the world's largest footwear market. Conversely, Trump's campaign in favor of local manufacturing will undoubtedly benefit the operators of the remaining shoe manufacturing facilities in the U.S., like those of New Balance and Wolverine Worldwide. It may also accelerate investment in robotics and 3D printing of customized shoes to bring the manufacturing process closer to the market.
New Balance expressed satisfaction at Trump's election, triggering protests by liberals who vowed to boycott the company for its initial comments.