The Section 301 punitive tariffs imposed by the US on apparel, footwear, travel goods and furniture imported from China have not only failed to make a significant negative impact on Chinese exporters, they have instead added to the operational costs of US companies.
- The net result is that the additional cost burden associated with the tariffs is being passed on to the prices paid by the final consumers — American families.
- The conclusions are from a study Impacts of Section 301 Tariffs on Imports from China: Case Studies of Apparel, Footwear, Travel Goods and Furniture.
- The report was prepared by Trade Partnership Worldwide at the request of the American Apparel & Footwear Association (AAFA), Footwear Retailers & Distributors of America (FRDA), the National Retail Federation (NRF), the Retail Industry Leaders Association (RILA), and the United States Fashion Industry Association (USFIA).
The Context: In August 2017, the US began an investigation under Section 301 of the Trade Act of 1974 of China’s technology and intellectual property related practices that it believed adversely affected US businesses.
- In 2018, the US concluded that China was failing to make changes to those policies and practices and that punitive tariffs of up to 25% should be imposed. Along with many raw materials and industrial products, thousands of tariff lines for consumer goods were included on the tariff lists.
- With few exceptions, those tariffs continue to affect imports of these products to this day; direct tariff costs to date exceed $166 billion. Of particular interest to American families are Section 301 tariffs applied to U.S. imports from China of apparel, footwear, travel goods and furniture, which were first imposed in 2018 and 2019.
- The Section 301 tariffs applied to consumer goods imported from China have had a host of significant indirect costs that have found their way into prices or have proven to be hits to the companies’ bottomlines.
- These include higher costs associated with: shifting — or trying to shift — sourcing out of China to other countries, including the United States; higher overhead; uncertainty surrounding the tariff exclusion process; and the need to establish bifurcated supply chains.
- The higher costs from the tariffs themselves as well as the indirect costs associated with them have found their way into the retail prices of apparel, footwear, travel goods and furniture, compounding the problem that for most of these goods, US MFN tariffs are among the highest in the tariff schedule.
- Increased prices for these goods have had a greater negative impact on households for which those goods represent greater shares of household income: households in the lowest 20% of income groups; minority-headed households, and those headed by individuals without a college education.