After years of inaction, Washington finally has scored a decisive trade victory for US families and the timely and unanimous win may even show a bipartisan path forward out of our years-long trade quagmire, however, more can be done to help US apparel and footwear shoppers.
Easily overlooked among semiconductor and infrastructure bill headlines, Congress last month passed the Fixing Our Regulatory Mayhem Upsetting Little Americans (FORMULA) Act. The measure, which has now been signed into law, addresses the months-long US baby formula shortage. Among Congress’s fixes for this “upsetting mayhem” was temporarily removing a 27% tariff on imported formula that Ways and Means Trade Chairman Blumenauer promised would “lower the cost of formula at a time when working families and single parents are struggling.” US Trade Representative ambassador Katherine Tai echoed this sentiment, noting it will “lower costs for American families.”
A no-brainer, right? Why would the US put import taxes on essential items for babies and their families? Even as partisanship runs rampant, this “upsetting mayhem” rightly galvanised unanimous Congressional action.
The symbolism of this action is that it starkly illustrates how the US’ tariff structure remains rigged against low and middle-income families and their children. Removing tariffs on baby formula, after all, is only a baby step in a measure to ease pricing pain. If these struggling families, as Chairman Blumenauer cites, were to dress their nursing baby, the US government will ask them to shell out tariffs on baby socks and shoes and other infant garments and face hefty import taxes. Go for a walk to think through that new family budget? Your stroller and cribs face tariffs too. Diaper bags and diapers? They also carry duties.
It doesn’t stop there. Gearing up for back-to-school will cost a US family import taxes on backpacks, children’s shoes, jackets, and bikes. Girls’ dresses, pyjamas, and school supplies get the same treatment.
How the US Government can help US apparel shoppers with record inflation
Many of these tariffs have been in place for nearly a century and reflect the economic conditions that were in place on the heels of the last pandemic. But some tariffs are only a few years old, having been imposed as part of the Section 301 trade war on China in the mistaken belief that we can somehow influence behaviour in Beijing by making it more expensive for US families to dress their kids every day.
These Section 301 tariffs magnify US consumer pain without any measurable strategic advantage. Diaper bags and back-to-school backpacks now face a 42% tariff – with a 25% Section 301 tariff added on top of a “normal” 17% tariff. Kids’ sneakers face a normal tariff of 67.5%, made even more expensive with an additional 7.5% Section 301 tariff layered on top.
These tariffs on essential goods disproportionately trip up lower-income families, by taxing items that make up a larger share of their purchases. Even worse, the tariff rate applied to lower-priced goods tends to be higher than more expensively priced goods. For example, an acrylic sweater carries a whopping 32% tariff while a cashmere sweater is only taxed at 4%. This means that the tariff structure on consumer goods is doubly regressive and painful on the US apparel shoppers who can least afford this burden.
What can be done to help US apparel shoppers? Plenty. Before you finish reading this article, President Biden can with the stroke of a pen cancel the Section 301 tariffs on these imports from China. He is already considering this as one of the tools to help mitigate inflation. As it just demonstrated, Congress can also suspend or cancel tariffs on consumer goods. At a minimum, it should use its oversight authority to review the tariff structure – something it hasn’t done in decades. It should also immediately and retroactively renew the long-expired Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB), both of which would provide relief for consumer items and both of which have been expired since December 2020.
“This is a relief that is long overdue,” Utah Senator Mike Lee said of the FORMULA Act. The same is true of relief from the web of tariffs flung over basic essential consumer goods working families can’t live without.
About the author: Steve Lamar is president and CEO of the American Apparel & Footwear Association, the national trade association representing more than 1,000 brands in the apparel and footwear industry. He leads a dedicated team of professionals who represent AAFA members before the government, through the media, and in industry settings on key brand protection, supply chain and manufacturing, and trade issues. He also advises AAFA member companies on legislation and regulatory policies.