Tariff Issues Cool, Concerns Remain
Following the United States Trade Organization’s confirmation this week that an additional duty of 5 percent on $300 billion in products from China—on top of an original figure of 10 percent—would be implemented starting Sept. 1, representatives from the Chinese and U.S. governments had started to cool on the heated situation. China will implement 5 percent to 10 percent tariffs on $75 billion in goods imported from the United States in two segments, one this weekend and another on Dec. 15, but, on Thursday revealed that it would not seek additional retaliatory measures, according to Bloomberg News.
Additionally, the Trump administration demanded that existing 25 percent tariffs on approximately $250 billion of imports from China be increased by 5 percent to 30 percent beginning Oct. 1.
For Steve Lamar, executive vice president of the American Apparel & Footwear Association, the impact on U.S. consumers for this holiday season could be negative. While the new tariffs will be administered in two groups, or tranches, most of the affected apparel and textile goods will be included on the first list. Lamar noted that the Sept. 1 list of goods includes 92 percent of the apparel, 53 percent of the footwear and 68 percent of the home textiles from China.
“This tax clearly hits the U.S. consumer, and it hits the U.S. consumer hard,” he said. “The administration is targeting the consumer with an enormous tax increase right before the holidays and another that will take effect in time for the holidays.”
As the vice president of customs and trade advisory at Flexport, Tom Gould reported that many of his clients were disappointed by the additional costs associated with the tariffs and were equally upset by the inadequate amount of time to prepare.
“While we are getting notice maybe 30 days in advance, the official notice isn’t coming out until days before the date,” Gould said.
Apparel suppliers in the United States that are locked into contracts could experience a loss on goods that are subject to additional tariffs once they reach the United States.
“A supplier to a big-box retailer might have already placed orders for a T-shirt, turned around and sold it to a big-box retailer with a profit margin of 5 percent,” he explained. “Now, they have to pay 10 or 15 percent on their cost and may have to sell at a loss right now.”
At the Los Angeles–based, made-in-the-USA brand Tianello by Steve Barraza, founder Steve Barraza creates finished apparel that relies on silks from China. While he was disappointed by the additional tariffs of 5 percent that he will pay upon the Oct. 1 increase to 30 percent, Barraza did see a silver lining when purchasing his silk from China.
“The good news is that the price of silk has fallen approximately $3 per meter since 2018,” he said. “There is no doubt that the tariffs have slowed consumption there.”
Disappointed with the first round of tariffs that affected this specialty fabric, which is not available in the United States, Barraza couldn’t understand the reason Chinese finished goods weren’t taxed first and wished there had been more consideration for United States manufacturers that rely on China’s specialty textiles.
“The final goal should be creating more jobs here. Taxing items that we don’t create here doesn’t do anything for us,” he said. “I don’t mind paying tariffs on things I could do here. We don’t produce linen or silk in the United States, and I never had to pay a duty on either of those [until now].”
A similar sentiment has been expressed by members of the AAFA, with Lamar trying to offer advice to business owners. Among his suggestions, Lamar has recommended businesses work with members of Congress on legislation and diversifying sourcing outside of China. Still, many within the industry might consider options that would have a negative impact on workers and consumers in the United States.
“Does it mean that they have to lay off workers? Does it mean they have to try to push these price increases through to consumers, risking loss of sales? Does it mean they must withhold investment to grow their businesses?,” he said. “They are extraordinarily frustrated that the administration isn’t doing its job to negotiate a trade agreement rather than impose tariffs,” he added.