When an $80,000 tariff bill landed on Haley Pavone’s desk in May, the 29-year-old founder of Pashion Footwear did what many small business owners would: she slammed the brakes on hiring and tacked a fee onto her website’s checkout page to help absorb the blow.
Pavone’s California-based company imports convertible heels from China—shoes that transform from flats to stilettos—but despite steep new tariffs imposed by President Donald Trump’s revived trade war, she hasn’t moved production out of the country. Not for lack of trying.
Over the past year, Pavone scouted manufacturing alternatives in Brazil, India, and Vietnam. But each presented hurdles she couldn’t overcome. Minimum order quantities were higher, workers lacked the technical training needed for her unique shoe design, and even if the shoes could be produced, essential components like plastic fittings and specialized metals still had to be sourced from China.
A test production run at a Vietnamese factory didn’t go well. The sample pair came back clunky and unrefined. So despite facing tariffs as high as 190% in April, she decided to stick with her trusted suppliers in China—for now.
With Washington also hiking duties on Vietnamese imports, Pavone says there’s even less reason to leave. “No one is as optimized as China,” she said. “The skill level, the infrastructure—it’s just not something you can easily recreate.”
Pavone’s dilemma is part of a larger problem playing out across the global economy. While many companies have explored “decoupling” from China since 2017, few have been able to fully pull it off. Even industries that have shifted assembly—like textiles, electronics, and auto parts—still rely heavily on Chinese inputs, according to a 2025 report by the Rhodium Group.
“No other country matches China’s scale, efficiency, and deeply integrated supply networks,” analysts Agatha Kratz and colleagues wrote.
The appearance of diversification, they argue, may be misleading. New research from economists at the World Bank and IMF finds that the U.S.’s actual reduction in reliance on China since 2017 is closer to 6 percentage points—not the 8 percentage points reported in top-line trade data. That’s partly because of an explosion in “de minimis” shipments (which dodge tariffs if valued under $800) and rerouting of goods through third countries.
“China is replacing itself in the U.S. market more than Mexico or Vietnam are,” noted economist Caroline Freund of UC San Diego, who led the study.
Trade data supports the finding. China’s direct exports to the U.S. have declined, but shipments to Southeast Asia have soared—while Southeast Asia’s exports to the U.S. have also risen sharply. The implication: much of what appears to be “non-China” trade still involves Chinese-made components.
In late June, the U.S. and China struck a tentative trade “understanding,” easing the most extreme tariffs triggered by Trump’s April 2 “Liberation Day” announcement. Those levies had escalated tariffs on Chinese goods to 145%, and to nearly 190% on some of Pashion’s shoes that already carried preexisting duties.
Still, uncertainty looms. There’s no clarity on how long the truce will hold or where final tariff rates will settle. Meanwhile, Pavone’s company—where shoes retail for about $200 a pair—is watching its margins get squeezed.
She says Pashion remains profitable for now, but it’s hard to compare other options to what she has in Dongguan, China: a smooth, decade-old operation where she can make small-batch orders, test new designs, and rely on expert craftsmanship from a factory staffed with hundreds of engineers.
Her supplier, Yaqin Long of Lovejoy Studio, is a second-generation shoemaker. She opened a Vietnamese plant in 2014 and has plans for another in Indonesia, but acknowledges that scaling operations outside China is slow, expensive, and complex.
“American clients are pushing us to move, but it’s difficult,” Long said from her Dongguan office.
Just getting started with a new factory would cost Pavone at least $50,000 up front—before even knowing what future tariffs might apply.
For now, she’s weighing her options while trying to keep her business afloat. Pashion Footwear launched six years ago and gained attention on “Shark Tank.” But this year, she says, feels like a step backward.
“It should have been a great year,” Pavone said. “Instead, it’s going to be a year defined by whether we survive at all.”
