The US Government can tackle record inflation
for apparel and footwear shoppers by cancelling both Section 301 and consumer
goods tariffs, says the American Apparel & Footwear Association (AAFA)'s president
and CEO Steve Lamar.
After years of inaction, Washington finally has
scored a decisive trade victory for US families and the timely and unanimous
win may even show a bipartisan path forward out of our years-long trade
quagmire, however, more can be done to help US apparel and footwear shoppers.
Easily overlooked among semiconductor and infrastructure bill headlines,
Congress last month passed the Fixing Our Regulatory Mayhem Upsetting Little
Americans (FORMULA) Act. The measure, which has now been signed into law,
addresses the months-long US baby formula shortage. Among Congress’s fixes for
this “upsetting mayhem” was temporarily removing a 27% tariff on imported
formula that Ways and Means Trade Chairman Blumenauer promised would “lower the
cost of formula at a time when working families and single parents are
struggling.” US Trade Representative ambassador Katherine Tai echoed this
sentiment, noting it will “lower costs for American families.”
A no-brainer, right? Why would the US put import taxes on essential items
for babies and their families? Even as partisanship runs rampant, this
“upsetting mayhem” rightly galvanised unanimous Congressional action.
The symbolism of this action is that it starkly illustrates how
the US’ tariff structure remains rigged against low and middle-income families
and their children. Removing tariffs on baby formula, after all, is only a baby
step in a measure to ease pricing pain. If these struggling families, as
Chairman Blumenauer cites, were to dress their nursing baby, the US government
will ask them to shell out tariffs on baby socks and shoes and other infant
garments and face hefty import taxes. Go for a walk to think through that new
family budget? Your stroller and cribs face tariffs too. Diaper bags and
diapers? They also carry duties.
It doesn’t stop there. Gearing up for back-to-school will cost a US family
import taxes on backpacks, children’s shoes, jackets, and bikes. Girls’
dresses, pyjamas, and school supplies get the same treatment.
How the US Government can help US apparel shoppers with record
Many of these tariffs have been in place for nearly a century and reflect
the economic conditions that were in place on the heels of the last pandemic.
But some tariffs are only a few years old, having been imposed as part of the
Section 301 trade war on China in the mistaken belief that we can somehow
influence behaviour in Beijing by making it more expensive for US families to
dress their kids every day.
These Section 301 tariffs magnify US consumer pain without any measurable
strategic advantage. Diaper bags and back-to-school backpacks now face a 42%
tariff – with a 25% Section 301 tariff added on top of a “normal” 17% tariff.
Kids’ sneakers face a normal tariff of 67.5%, made even more expensive with an
additional 7.5% Section 301 tariff layered on top.
These tariffs on essential goods disproportionately trip up lower-income
families, by taxing items that make up a larger share of their purchases. Even
worse, the tariff rate applied to lower-priced goods tends to be higher than
more expensively priced goods. For example, an acrylic sweater carries a
whopping 32% tariff while a cashmere sweater is only taxed at 4%. This means
that the tariff structure on consumer goods is doubly regressive and painful on
the US apparel shoppers who can least afford this burden.
What can be done to help US apparel shoppers? Plenty. Before you finish
reading this article, President Biden can with the stroke of a pen cancel the
Section 301 tariffs on these imports from China. He is already considering this
as one of the tools to help mitigate inflation. As it just demonstrated,
Congress can also suspend or cancel tariffs on consumer goods. At a minimum, it
should use its oversight authority to review the tariff structure – something
it hasn’t done in decades. It should also immediately and retroactively renew
the long-expired Generalized System of Preferences (GSP) and Miscellaneous
Tariff Bill (MTB), both of which would provide relief for consumer items and
both of which have been expired since December 2020.
“This is a relief that is long overdue,” Utah Senator Mike Lee said of the
FORMULA Act. The same is true of relief from the web of tariffs flung over
basic essential consumer goods working families can’t live without.