As the US Trade Representative issues notice for the statutory process leading up to the four-year anniversary of the Section 301 tariff actions against China, the US apparel industry tells Just style what it could mean for apparel.

The office of the US Trade Representative (USTR) announced this week it would notify representatives of domestic industries that benefit from the tariff actions against China of the possible termination of those actions and it will give representatives the chance to request for its continuation. If a request for continuation is received, USTR will conduct a review of the tariff actions.

Associate professor of fashion and apparel studies at the University of Delaware, Dr Sheng Lu tells Just Style exclusively that most US fashion brands and retailers strongly oppose the punitive tariffs against Chinese products.

The United States Fashion Industry Association (USFIA) president Julia Hughes tells Just Style her organisation is pleased the Biden Administration is beginning the process to review the impact and the need for the China 301 tariffs.

She says: “Frankly our recommendation is the Administration should immediately lift the 301 tariffs on consumer products, such as apparel, accessories and footwear, covered in List 3 and List 4A. Removing those tariffs would have an immediate beneficial impact on inflation since American companies and consumers are the ones paying the tariffs.”

Lu adds that many US brands and retailers are against the tariffs because despite them being in place, China has remained a leading apparel sourcing base for many US fashion companies with no practical alternative.

He explains: “The trade statistics show that three years into the tariff war, China still accounted for nearly 40% of US apparel imports in quantity and about one-third in value as of 2021. Studies also consistently find that US fashion companies rely on China to fulfil orders requiring a small minimum order quantity, flexibility, and a great variety of product assortment.”

Lu adds for fashion companies still importing from China, the punitive tariffs have increased sourcing costs and cut profit margins.

“US fashion companies had to add nearly US$1bn extra import duties to their yearly sourcing costs. According to the 2021 USFIA Fashion Industry Benchmarking Study, nearly 90% of respondents say the tariff war directly increased their company’s sourcing cost. Another 74% say the tariff war hurt their company’s financials.”

Sheng also suggests that as companies began to move their sourcing orders from China to other Asian countries like Vietnam, Bangladesh, and Cambodia to avoid paying punitive tariffs, these countries’ production costs all went up because of the limited production capacity.

In other words, he says sourcing from everywhere became more expensive because of the Section 301 action against China. 

Lu believes it’s important to recognise fashion companies supported the US government’s efforts to address China’s “unfair” trade practices, such as subsidies, intellectual property rights violations, and forced technology transfers.

He explains: “Many US fashion companies were the victims of such practices. However, fashion companies did not think the punitive tariff was the right tool to address these problems effectively. Instead, fashion brands and retailers were concerned that the tariff war unnecessarily created an uncertain and volatile market environment harmful to their business operations.”

The American Apparel & Footwear Association (AAFA) joined a letter urging the US Trade Representative Katherine Tai for a fully transparent review of the Section 301 tariffs on products from China last month.

The AAFAs vice president of trade and customs policy, Beth Hughes, tells Just Style the organisation is still reviewing the 301 China tariffs and discussing it with members. However, she’s keen to highlight that “tariff relief continues to be of utmost importance at a period of record inflation among other challenges facing this industry and harming consumers”.

Meanwhile, National Council of Textile Organizations (NCTO) president and CEO Kim Glas says: “We have consistently advocated for the penalty tariffs to remain on finished textile and apparel products from China because we believe it increases the negotiating leverage to address the serious and substantial predatory trade practices that have hurt our domestic manufacturing sector and that of our free trade agreement partners.”

She adds: “For decades, China’s illegal actions have undermined virtually every domestic manufacturing sector and contributed to the direct loss of millions of US jobs. These devastating state-sponsored practices, which include intellectual property theft, pervasive state-ownership of manufacturing, industrial subsidies, and abhorrent labour and human rights abuses in the Xinjiang region, have allowed China to dominate the global marketplace, which has had severe ramifications on American workers and our Western Hemisphere trade allies. As sourcing executives seek to de-risk out of China for these products, our sector is experiencing massive investment in the US and Western Hemisphere supply chains. In fact, we expect approximately $1bn of investment announced in the United States and Central America this year alone, as penalty tariffs have played a key role in sourcing shifts.

“Throughout the Trump Administration and the Biden Administration we advocated for the tariffs to be added and maintained on finished products to ensure we address these larger systemic issues that have substantially hurt our sectors.”

The NCTO notes the review process, which is required by statute and being undertaken by the USTR, will allow domestic manufacturers to weigh in on whether removing the tariffs will be harmful and trigger USTR to do a further review.

“Our position has not wavered. The US must maintain Section 301 tariffs on finished products, in the absence of substantive improvements in China’s pervasive, predatory trade practices. Lifting these penalty duties will cement China’s destructive dominance of global manufacturing and will do nothing to achieve the administration’s goal of easing inflationary pressures, as apparel prices out of China continue to hit rock bottom regardless of the Section 301 tariffs,” Glas adds.

Lu believes the prospect of the US-China tariff war remains unclear. Notably, he says the overall US-China bilateral trade relationship significantly deteriorated in recent years.

He makes the point that besides the tariff war, the frictions between the two countries had expanded into highly politically sensitive areas such as forced labour and human rights.

“This explained why the Biden Administration wilfully chose to keep the Section 301 tariff as negotiation leverage with China. Domestically, President Biden also didn’t want to look ‘weak’ on his China policy, given the bipartisan support for taking on China’s rise.”

Lu sees the ongoing Covid pandemic as another critical factor affecting the fate of the Section 301 tariffs in the Biden Administration. He explains because of widespread shipping delays and supply chain disruptions caused by the pandemic, US policymakers thought it was necessary to bring manufacturing back to the US for the sake of national security instead of relying on imports heavily.

He adds Covid meant the Administration was under mounting pressure to ease the worst inflation facing the US economy in decades.

“Some argue that lifting the Section 301 tariffs on imports from China, especially consumer products like apparel, would help halt inflation and boost President Biden’s support rate among the public.”

By Just Style