On Tuesday the Trump administration sought to buy votes and silence farmers by offering them $12 billion to stop complaining about lost business due to tariffs. But while those in our industry who focus on global supply chains can easily empathise with the farmers…the difference is that the US government won’t bail us out, writes Rick Helfenbein, president and CEO of the American Apparel & Footwear Association (AAFA).
When President Trump attended elementary school, he may have encountered the Danny Dunn children’s book series. The main character of the book was Danny Dunn, a red-headed, precocious, and headstrong young man whose forte was getting in and out of trouble. (Sound familiar?)
Years later, what was once a great adventure story has now morphed into a massive trade entanglement, fraught with a potential failure of epic proportions.
On Tuesday (24 July) the Trump administration sought to buy votes and silence farmers by offering them $12 billion to stop complaining about lost business due to tariffs. With 2.1 million farms in America, that translates into about $5,700 a farm, which is almost enough to keep the lights on, but not sufficient to run the farm or cover their losses.
“The Trump administration is clearly trying to put a band-aid on its self-inflicted bruise in time for the mid-term elections, while not endeavouring to address a problem that has the potential to become malignant”
The Trump administration is clearly trying to put a band-aid on its self-inflicted bruise in time for the mid-term elections, while not endeavouring to address a problem that has the potential to become malignant. Simply put, farm products are getting slaughtered in the international markets, and farm commodity futures are in the toilet – all because of proposed and reactive trade tariffs.
Just yesterday, the President taunted us again by tweeting: “Every time I see a weak politician asking to stop Trade talks or the use of Tariffs to counter unfair Tariffs, I wonder, what can they be thinking?”
STOP! Mr President, we wonder what you are thinking?
Which trade war are you winning? You have been in office for 40% of your first term, and you don’t have any trade wins yet. The biggest success so far happened just yesterday, with a ceasefire on the EU trade war that we started. We appreciate your effort to fix our intellectual property issues with China, and for trying to promote Made in America and exports. But this nonsense about the trade deficit has got to stop. At Wharton, they quote the great economist Adam Smith who said: “Nothing can be more absurd than this whole doctrine of the balance of trade.”
When our economy is good, the trade deficit worsens. When our economy is bad, the deficit improves. If trade deficits were such a good measure of the economy, Russia would be in great shape and we would be faltering. Even Larry Kudlow, director of the National Economic Council (NEC), said that trade deficits were not his favourite metric, while encouraging everyone to have some patience amid the trade disruptions. Kudlow likes to attempt to lower the trade temperature – from trade war to trade dispute to trade discussion to a family disagreement.
In all fairness to President Trump, we did win a concession from South Korea. But, also in fairness, that is not settled yet. NAFTA hasn’t been fixed, we have withdrawn from the TPP, we have ridiculed the WTO, and we have verbally attacked our top six trading partners: China, Canada, Mexico, Japan, Germany and South Korea. This is the mark of a president who prefers antagonism over reconciliation. At some point, we must seal the deal or call it quits. Unending confrontation is NOT the answer.
In our world of apparel, footwear, and travel goods, we can choose where we make product. Over the years, our supply chains have worked hard to bring competitive product to the American consumer. Today (despite high protectionist tariffs that we already carry), our industry is 98% imported with 41% of apparel, 72% of footwear, and 84% of travel goods coming directly from China.
“If tariffs are a good way to increase exports of American products, then explain why only 3% of apparel is made here following decades of high tariffs – many of which date back to the 1930s?”
If tariffs are a good way to increase exports of American products, then explain why only 3% of apparel is made here following decades of high tariffs – many of which date back to the 1930s? Explain why our industry represents 6% of all imports, yet pays 51% of the duties collected by the US government? Truth be told, the speed to market aspect of Made in USA is terrific. However, the ability to compete on the world stage is difficult, so the bulk of our manufactured products remain elsewhere to keep us competitive globally.
We cannot sit on the sidelines
Those in our industry who focus on global supply chains can easily empathise with the farmers. The difference is that we have choices; they do not. In the farm world, either you plant the fields, or you do not. Either you raise livestock, or you do not. The farm world is grinding to a halt, and Secretary Perdue’s kind offer to spend $12 billion to prop them up is a subsidy that farmers probably don’t want, and Republicans are hesitant to give.
President Trump has clearly cast his lot with the farm community. He wants them to remain calm, in the face of his own failing trade strategy.
We, on the other hand, cannot sit on the sidelines. Our apparel, footwear, and travel goods industry fully understands that we are next in line to take the hit.
The only difference is that the US government won’t bail us out.
We will clearly face the triple negative. Prices will go up, sales will go down, jobs will be lost.
This reminds me of one often repeated quote from the Danny Dunn series:
“Split personality – when a man is two people at once,” said Joe.
“Huh?” Danny grunted.
“Sure, I saw it on another TV horror show,” said Joe. “There was this good guy, and when the moon was full he turned into a monster.”
“Don’t be silly,” Danny said. “The moon isn’t even out now.”