Ahead of her testimony against the proposed Section 301 tariffs on all imports from China – which would include all clothing and footwear – Julia Hughes, president of the United States Fashion Industry Association (USFIA), explains why the negative impact of tariffs on China will not just hurt brands and retailers, but also their global supply chains. And, she says, it’s not too late to speak out.
It’s summer in Washington DC, and the streets are full of tourists at the Capitol, White House, monuments and museums. What is different in 2019 is that the streets around the International Trade Commission are also full of visitors – dozens of Americans who have come to the nation’s capital to make their voices heard. We aren’t talking about a protest march or a concert. Instead our friends and colleagues are coming to Washington to speak out against the proposed 301 tariffs on China.
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“”Our message is to leave all fashion products off the list of products subject to tariff increases under Section 301”
You know the background. In August 2017 the Trump Administration started an investigation into China’s intellectual property rights (IPR) policy and the impact of forced technology transfers. In April 2018 it imposed tariffs on $46bn of imports from China. China retaliated and since then we have seen ever-escalating tariffs. List 3 includes important consumer items like handbags, accessories, and leather and are currently paying an additional 25% tariff. And now we are facing the existential threat of higher tariffs on all imports from China.
Fashion made possible by global trade
More than 300 people asked to appear at the public hearing on List 4. USFIA is testifying today (24 June) and I want to share a few highlights that reinforce what brands and retailers and wholesalers have been telling the administration. We are going to start out stating the obvious – reflecting our mission to support the industry and Fashion Made Possible by Global Trade. Our message is to leave all fashion products off the list of products subject to tariff increases under Section 301.
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By GlobalData“The negative impact of tariffs on China will not just hurt brands and retailers: our suppliers and our supply chain partners also will be hit hard”
Listening to the testimony is a reminder that the fashion industry prospers thanks to global supply chains. A bale of cotton may be grown in Texas, shipped to Europe to be made into yarn, shipped to Korea to be made into fabric, shipped to Vietnam to be made into apparel, and shipped to the United States to be sold at retail in a store back in Texas. But even more exciting, those garments made using that supply chain might also be sold in Singapore, Japan, Dubai, or London.
Many of the statements also emphasised the fact that the fashion industry is a significant contributor to high-paying employment here in the United States. Retail operations alone support 42 million jobs – or 1 in 4 jobs in the United States. Fashion brands and retailers support high-quality, high-paying design, product development, logistics, sourcing, e-commerce and service jobs, to name a few. In fact, according to studies of our industry’s global value chains, more than 70% of the value of imported clothing remains here in the United States – even if the clothing is manufactured outside of the United States. The negative impact of tariffs on China will not just hurt brands and retailers: our suppliers and our supply chain partners also will be hit hard.
What will we highlight in our testimony?
First, the fact that tariffs on fashion products are a huge tax increase. Tariffs on clothing, footwear, and other fashion products are already among the highest charged on consumer products, reaching 32% for manmade fibre apparel and 67% for footwear. During 2018, American fashion brands and retailers paid more than $12bn dollars in tariffs on apparel and home textiles. And another $3bn on imported footwear. Imposing additional tariffs on these products would constitute a huge, regressive tax increase. We have to ask the administration: Why burden American families even more?
“Additional tariffs – and even the threat of those tariffs – is having a tremendous impact on American companies. Even with efforts to shift supply chains, there are limited options to move sourcing”
Let’s make no mistake about it: Tariffs on clothing and footwear would amount to a huge regressive tax on hard-working American families who can’t afford to pay more for clothing and shoes. It would also do tremendous harm to American retailers and brands, who can’t afford to shoulder these tremendous cost increases. We find it hard to believe that the administration really intends – as we enter the back-to-school season – to tax American families’ clothing and shoes and home textiles and this wide range of products, as well as threatening entry level jobs at stores throughout the country.
Second, the fact remains that for many of these products, China is still the #1 supplier in the world, with no realistic options for other sourcing destinations that could replace China. There are many types of products where China is the main source, or virtually the only source. Companies have invested thousands of hours to prepare contingency plans and assess alternative sourcing options to diversify from China. In the testimony prepared for these hearings, there are many companies who tell this story very eloquently. We want to amplify their message that additional tariffs – and even the threat of those tariffs – is having a tremendous impact on American companies. Even with efforts to shift supply chains, there are limited options to move sourcing.
Finally, we also are going to make clear that while the Section 301 tariffs may result in trade diversion from China, it will not lead to more sourcing in the United States. Often we hear the argument that uncertainty and disruption to global supply chains will lead to more jobs in the United States as manufacturing returns from overseas.
No ‘Made in USA’ boost
That is not the case for the fashion industry. Entry level jobs, cutting and sewing basic clothing items, are mainly gone from the United States and are not coming back. The capacity and the workers are not in the US. That’s not just my opinion. This year in the 2019 USFIA Benchmarking Survey (which will be released next month) we specifically asked sourcing executives where they are moving production when they leave China.
When asked about the impact of the Section 301 on companies’ sourcing strategy and businesses, companies overwhelmingly responded that “because of the tariff action, we intentionally moved some sourcing orders from China to other Asian suppliers.” No respondents believe Section 301 will bring textiles and apparel manufacturing back to the United States. That is right, not a single company said they had found the capacity for production in the US. And rather ironically, some respondents raised concerns that “(Section 301) increases costs for our ‘Made in USA’ products and exports.”
We hope our message will be heard and that the administration will not impose tariffs on fashion products. We hope that there will be a truce in this trade war and that we can move forward to solve the very real issues of IPR violations and forced technology transfers.
In the meantime, I want to close with a thank you to everyone who has filed comments or signed an industry letter, and special thanks to everyone who testified in person and joined the crowds in DC. This outpouring from the industry sends an important message to decision makers. And if you did not already speak out, it’s not too late. If you are doing business in China you should sign onto a multi-industry letter from Americans for Free Trade and Tariffs Hurt the Heartland. The original letter included 661 companies and associations and more are signing every day. Click here to see the original letter and click here to join the movement!
Let’s make sure our voice is heard in Washington!
