The Section 301 Tariffs on American Consumers and US Businesses imposed by the Trump administration in 2018 in response to China’s unfair trade practices, seem to have boomeranged on the US doing more harm than good. A recent joint industry study has pointed out the negative Impacts on US consumers of Section 301, which was intended to compel US companies to move supply chains out of China and has affected many general segments of the average American consumer.
The joint industry study which included the United States Fashion Industry Association, the American Apparel & Footwear Association, the Footwear Retailers & Distributors of America, the National Retail Federation as well as the Retail Industry Leaders Association, elaborated on the detrimental economic impacts of Section 301 tariffs which are the taxes paid by American businesses and consumers. The report titled ‘Impacts of Section 301 Tariffs on Imports from China’ looks at the punitive tariffs that began in 2018 and provides an in-depth assessment of the impacts of the Section 301 tariffs over the last four years on US imports in segments such as apparel; footwear, travel goods and furniture imported from China.
High tariff rates on children’s footwear
The extensive report is based on US government data of responses to a survey of American companies who source their goods from China and revealed some key findings. Firstly, the negative impact of tariffs of higher costs and higher prices has fallen on US businesses and companies as well as average American families. Secondly, these tariffs have led to many other important indirect costs such as those associated with attempts to establish bifurcated supply chains. Thirdly, increased prices on consumer goods have had a detrimental impact on most American households where these represent a greater share of family income. These affected households, including the lowest 20 per cent of income groups; minority-headed households as well as families headed by individuals without a university education.
The MFN and Section 301 Tariff rates have also affected Section 301 products from China in different percentage levels in the four categories: apparel, footwear travel goods and furniture. These tariff rates are among the highest in the US tariff code and absent in the Section 301 duties on US imports from China. The American MFN duties on low-value and children’s footwear are much higher than those on other types of footwear, which is a burden on the average middle-class American family with school-going children. Section 301 duties add almost 25 per cent to the tariff burden for imported Chinese products.
However, the tariff that most heavily impacted American imports from China was on waterproof footwear. These tariffs imposed an annual direct cost on American importers of over $250 million, which escalated regularly every year to over $450 million in 2022 with no tariff exclusions granted to lessen the negative impact on footwear-sourcing companies. As per Mercatus Center, a US research centre at George Mason University, every one of the 442 footwear product exclusion requests filed was denied.
Opposition against tariff removal
Although the US apparel industry welcomed an announcement at the end of 2022 by the Biden administration to extend exclusions for many of the tariffs imposed by Trump, not everyone is agreeing to it. Many like the National Council of Textile Organizations have strongly refuted this and claimed tariffs must be retained if the US has any hopes of realizing nearshoring opportunities. These tariffs have given US manufacturers a chance to compete with others, says NCTO and the US Industrial and Narrow Fabrics Institute (USINFI). These associations which showcase the entirety of US textile production chain, have instead expressed strong support for the current Section 301 penalty tariffs on finished textiles and apparel imports from China to continue for better economic effect. With a changed US administration and the dawning of year, the global apparel industry awaits changes in the new laws for better or for worse.