Textile Insight

IN THE MARKET | TARIFF UPDATE Talks of New Duties has Supply Chain and Trade Experts Working Overtime. By Bob McGee Threats Bring Truces and Turmoil textileinsight.com ne really needs a scorecard to follow all of the U.S. developments with global trade over the last seven months. Mexico, China and most recently, the European Union, have each been threatened with new tariffs on products their respective countries produce. But the bottom line at this juncture — subject to a moment's notice change by the Trump Administration — is that the apparel and footwear industries and retailers appear safe from any additional levied tariff costs ahead of the crucial Back-to-School and Holiday selling seasons. And despite six months of posturing, pontificating and maneuvering by Chinese and U.S. officials, most pundits today believe there will be no further escalation of tariff talk between the two countries until after the 2020 election season. Until late June, there was sizeable industry and market worry that the United States would levy an additional 25 percent tariff on $300 billion worth of China-made merchandise imported into the U.S., including footwear and apparel. The month was marked by weeks of public testimony before the U.S. Trade Representative by all sorts of executive and trade leaders from various industries, including Columbia Sportswear CEO Tim Boyle and Bill Sells, SVP of government relations and public affairs. Sells' comments focused on the inequity between tariff rates on raw material inputs and the rates on finished products containing those inputs; domestic sourcing inadequacies and complex supply chains; and the way any new tariffs would burden the trade organization's 300 member and the 750 brands they represent. A Trade Partnership Worldwide report, commissioned by the National Retail Federation, estimated that any new footwear and apparel tariffs would cost Americans $6.9 billion annually, including $4.4 billion more each year for clothing and $2.5 billion for footwear sourced in China. At month's end, however, there was a collective sigh of relief as the Trump Administration called its second trade truce with China since Dec. 2018 and agreed to continue negotiations with the country's largest trading partner, which agreed to escalate its purchase of U.S. farm products in one concession ahead of further negotiations. Earlier in June, Mexico was the tariff target with the administration promising to impose an additional 5 percent duty on all goods entering the U.S. from its neighbor to the South on July 1 and escalate that tariff 5 percent monthly until it reached 25 percent unless the Mexican government stemmed the flow of illegal immigrants into the U.S. Almost immediately, the U.S. Chamber of Commerce weighed in against the threatened U.S. tariff action against Mexico, estimated to have an $18.6 to $93 billion impact depending on the percentage of any new duty. "These tariffs will be paid by American families and businesses without doing a thing to solve the real problems at the border," proclaimed Neil Bradley, chief policy officer for the USCC. "Instead, Congress and the president need to work together to address the serious problems at the border." Within a week, the potential trade war with Mexico, which would have raised the cost of footwear produced there, was resolved. President Trump said as much in a June 8 tweet, apparently satisfied that Mexico was taking major steps to stem the surge of migrants from its borders into the U.S. As the calendar turned to annual 4th of July celebrations, tariff talk did not simmer down. The U.S. began threatening the European Union with $4 billion on new tariffs on 89 products, including meats/ cheeses, liquor and fruits but apparently not apparel or footwear, due to aircraft subsidies given to EU members. l O "These tariffs will be paid by American families and businesses without doing a thing to solve the real problems at the border." Neil Bradley, chief policy officer for the USCC

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