The American apparel, footwear and retail industries which claim higher costs linked to tariffs are significantly pressuring US brands, retailers and ultimately consumers.
The American Apparel & Footwear Association, the National Retail Federation, The Retail Industry Leaders Association, and the United States Fashion Industry Association published a study indicating the “detrimental economic impacts” of Section 301 tariffs.
According to the report, American businesses and consumers have been adversely affected by the imposition of the punitive tariffs that began in 2018. The report provides an in-depth assessment of the impacts of the Section 301 tariffs over the last four years on US imports of apparel, footwear, travel goods and furniture imported from China. It is based on US government data amplified by responses to a December 2022 survey of American companies sourcing those goods from China.
Section 301 tariffs on apparel imported from China had very little negative impacts on Chinese producers. U.S. manufacturers and workers didn’t benefit…higher costs & higher prices fell on U.S. companies & American families. #TariffsHurt https://t.co/Yu5DNucYzQ pic.twitter.com/Y0JVoWyntl— AAFA (@apparelfootwear) January 17, 2023
Key findings of the report
- The negative impact of the tariffs – higher costs and higher prices – fell on US companies and American families;
- The tariffs have led to a host of significant indirect costs, including those associated with attempts to establish bifurcated supply chains; and
- Increased prices on consumer goods have had a greater negative impact on American households for which those goods represent greater shares of household income: households in the lowest 20% of income groups; minority-headed households, and households headed by individuals without a college education.
The report suggests tariffs on US imports of apparel, footwear and travel goods, in particular, are among the highest in the US tariff code, even absent the Section 301 duties on US imports from China. For example, US MFN duties on low-value and children’s footwear are much higher than those on other types of footwear. The Section 301 duties add considerably – sometimes up to 25% – to this tariff burden for products imported from China.
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AAFA President and CEO Steve Lamar told Just Style: “These tariffs never worked. They were a bad idea when they were proposed. They were a bad idea when they were imposed. And they remain a bad idea – four years and more than $170bn later. It’s time for the Administration to let go of this bad idea, on behalf of all Americans and US businesses.”
But the National Council of Textile Organizations has strongly refuted the claims, arguing the tariffs must be retained if the US has any hopes of realizing the nearshoring opportunity.
The tariffs have allowed US manufacturers a chance to compete, the National Council of Textile Organizations (NCTO) and the US Industrial and Narrow Fabrics Institute (USINFI), say.
In a formal submission to the US Trade Representative’s (USTR) office, which is conducting a four-year statutory review of the tariffs, the associations, representing the entirety of the US textile production chain, expressed strong support for the continuation of current Section 301 penalty tariffs on finished textiles and apparel imports from China and outlined the effectiveness of US tariff actions.
“In some cases, such as on finished apparel, the tariffs have worked to partially offset and counteract China’s unfair trade advantages,” the groups say. “The tariffs on finished textile and apparel items are giving US manufacturers the chance to compete, and we are seeing encouraging investment and growth in moving some production and souring from China back to the Western Hemisphere.”
“The CAFTA-DR [Dominican Republic-Central America Free Trade Agreement] region has seen more than $1 billion in new textile and apparel investment this year, for example, which is historic and due to the textile and apparel rules negotiated under the agreement and sourcing shifts from China,” they added. “This investment and growing US imports from the Western Hemisphere is attributable in part to the 301 tariffs on finished apparel. The tariffs on finished items in our sector are broadly supported by textile/apparel producers in the hemispheric co-production chain, and it is essential that they remain in place, absent China reforming its practices.”
The groups stressed that lifting the tariffs on finished textiles and apparel products from China “will solidify their global dominance in this sector for generations to come and reward their abusive behaviours, exacerbate the migration crisis, hurt domestic manufacturers and workers, undermine our ability to recalibrate essential PPE supply chains, and blunt the positive supply chains shifts and investments in the Western Hemisphere that are happening.” They added it would “do nothing to solve the inflation crisis facing US consumers and manufacturers right now.”
What are the likely next steps for the Biden Administration regarding Section 301 tariffs?
Speaking exclusively to Just Style, University of Delaware’s associate professor of fashion and apparel studies, Dr Sheng Lu, comments on the conflicting opinions of the two sides. But he is of the view the Biden Administration would, at least in the near term, be looking to retain the Section 301 tariffs.
“The US textile argued that keeping the punitive tariffs on finished goods from China would benefit US domestic textiles and apparel production and expand sourcing from the Western Hemisphere. In contrast, US fashion companies are concerned that the punitive tariffs have been ineffective in addressing China’s unfair trade practices and only deteriorated inflation and hurt US consumers.
“Trade data also show that Asian countries such as Vietnam and Bangladesh picked up most of China’s lost market shares in the US apparel import market. However, US textile industry insists that China remains the top threat to the Western Hemisphere textiles and apparel supply chain in the long run.
“USTR’s Section 301 review may take a few months, although the detailed timeline is unknown. Overall, it doesn’t seem too likely that the punitive tariffs on Chinese imports will go away anytime soon. Particularly, in the context of a soaring US-China relationship and with the 2024 election quickly approaching, the last thing the Biden administration wants is to look ‘weak’ on its China policy. However, it is also likely that USTR may reinstate the Section 301 tariff exclusion process to create certain policy flexibilities as the frustrations and pressures from the business community continue to build.”
In addition to the USTR review, the US International Trade Commission (USITC) is also conducting its independent assessment of the economic impact of the Section 301 action against China. The USITC expects to submit its report to Congress by 15 March 2023.