A new joint study released today from several retail and trade organizations is calling out “detrimental economic impacts” the Section 301 tariffs on China are affecting American businesses and consumers.
Conducted by the American Apparel & Footwear Association (AAFA), the Footwear Distributors & Retailers of America (FDRA), the National Retail Federation (NRF), the Retail Industry Leaders Association (RILA), and the United States Fashion Industry Association (USFIA), the study provides an in-depth assessment of the impacts of the Section 301 tariffs over the last four years on U.S. imports of apparel, footwear, travel goods and furniture imported from China.
The study is based on U.S. government data amplified by responses to a December 2022 survey of American companies sourcing those goods from China.
The study makes three key findings. Firstly, the negative impact of the tariffs – higher costs and higher prices – fell on U.S. companies and American families. Secondly, the tariffs have led to a host of significant indirect costs, including those associated with attempts to establish bifurcated supply chains. And lastly, increased prices on consumer goods have had a greater negative impact on American households for which those goods represent greater shares of household income, like households in the lowest 20% of income groups; minority-headed households, and households headed by individuals without a college education.
“These tariffs don’t hurt China,” Steve Lamar, president and CEO of AAFA, told FN. “They are paid by U.S. companies and instead passed on to American companies. And disproportionately impact low-income families. Children’s footwear products are a basic need. Dry work boots are a basic need. We invite the Biden administration to review this report, and make changes to this protectionist trade approach.”
Matt Priest, president and CEO of FDRA added in a statement to FN that the 4-year tariff review may be the only chance companies have to weigh in with the Biden Administration on the harmful effect of the tariffs.
“This study confirms what FDRA has been arguing for years — that 301 tariffs on footwear mean higher costs and higher prices for American companies and consumers,” Priest said. “The study also highlights the significant cost on working class families. It is our hope that the Administration takes this study and our subsequent comments seriously and immediately removes the 301 tariffs on all footwear.”
In August 2017, the United States began an investigation under Section 301 of the Trade Act of 1974 of China’s technology and intellectual property related practices that the United States believed adversely affected U.S. businesses. In 2018 the United States concluded that China was failing to make changes to those policies and practices and that punitive tariffs of up to 25% should be imposed. Thus, Section 301 tariffs were applied to U.S. imports from China of apparel, footwear, travel goods and furniture in 2018 and 2019.
When it comes to footwear, Section 301 tariffs of 15% were imposed on about half of the footwear imported from China on Sept. 1, 2019. Those tariffs were later reduced on Feb. 14, 2020, to 7.5%.
According to the study, the tariffs most heavily impacted imports from China of waterproof footwear (97% of the value of pre-tariff imports or waterproof footwear from China was affected by the tariffs) and leather footwear (95% of total leather footwear imports from China in 2017).
The tariffs imposed an annual direct cost on importers of over $250 million, escalating every year to over $450 million in 2022, the study stated. No footwear tariff exclusions were granted to mitigate the negative impacts of the tariffs on footwear sourcing companies. According to Mercatus Center, every one of the 442 footwear product exclusion requests filed was denied.
“In short: like apparel, the burden of the Section 301 tariffs on footwear imported from China has fallen primarily on U.S. companies and American families in the form of higher costs and higher prices,” the study concluded. “They had very little negative impacts on Chinese producers, who managed to maintain most of their business with U.S. customers, and even increase it this year. U.S. manufacturers and their workers did not benefit from any significant (if even measurable) reshoring of footwear sourcing.”
Read the full study here.