The move made Thursday and designed to teach China a lesson about its technology transfer and intellectual property errs, will likely have wide-reaching impacts — including on the apparel and footwear industries — as China has promised to retaliate.
Ahead of the signing, Trump said China accounts for more than half of the $800 billion trade deficit the United States has with the world. The deficit with China, specifically, is either $504 billion or $375 billion “depending on the way you calculate,” the president said, adding that regardless, “it’s out of control.”
And the “tremendous intellectual property theft situation going on” is what prompted the tariffs.
“We’re going to be doing a section 301 trade action, it could be about $60 billion, but that’s really just a fraction of what we’re talking about,” Trump said. “I’ve been speaking with the highest Chinese representatives, including the president, and I’ve asked them to reduce the trade deficit immediately by about $100 billion. It’s a lot. So that would be anywhere from 25 percent [tariffs] depending on the way you figure, to maybe something even more than that.”
That means brands and retailers could be required to pay upward of 25 percent tariffs on goods being imported from China. The potential effect on sourcing stands to be substantial.
Though the president didn’t address exactly which products those tariffs would be placed on, U.S. Trade Representative Robert Lighthizer, who spoke after the president, said, “We should put in place tariffs on appropriate products. We can explain later how we concluded which products they are.”
Later, it turns out, should be within 15 days, as that’s the timeframe U.S. officials gave for release of a detailed list of tariff targets.
Further to its actions against China, Lighthizer said the U.S. will put investment restrictions on China with respect to high technology and that it intends to file a World Trade Organization complaint over one of China’s actions it believes to be a WTO violation.
Ahead of Thursday’s tariff order, China had already said it would place tariffs on U.S. agriculture exports, though what the country ultimately decides to target will depend on where the U.S. takes its tariffs.
On Thursday, China’s Ministry of Commerce said “China will certainly take all necessary measures to resolutely defend its legitimate rights and interests.”
The concern for the apparel and footwear sectors now, as it sweats out the 15-day wait to see how bad things could potentially be for the industry, is that any tariffs will send prices up and already price conscious consumers packing.
“There is no way to impose $50 billion in tariffs on Chinese imports without it having a negative impact on American consumers. Make no mistake, these tariffs may be aimed at China, but the bill will be charged to American consumers who will pay more at the checkout for the items they shop for every day,” Hun Quach, Retail Industry Leaders Association (RILA) vice president of international trade, said in a statement following Trump’s announcement. “This trade tax has the potential to wipe out any gains the average American family received from tax reform.”
Editor’s Note: This story was reported by FN’s sister magazine, Sourcing Journal. For more, visit sourcingjournal.com.