Tariff-driven costs pile up, report finds

A US study has shed more light on the "detrimental economic impacts" of the massive tariffs imposed on consumer goods from China, saying that the Washington-instigated trade war has led to higher costs and prices for companies and families across the United States.

The report, "Impacts of Section 301 Tariffs on Imports from China: Case Studies of Apparel, Footwear, Travel Goods and Furniture", was released by industry groups on Tuesday, a day before US Treasury Secretary Janet Yellen and Chinese Vice-Premier Liu He met in Zurich, Switzerland.

The study was published by the American Apparel & Footwear Association, the Footwear Retailers& Distributors of America, the National Retail Federation, the Retail Industry Leaders Association, and the United States Fashion Industry Association.

US then-president Donald Trump launched a trade conflict with China in 2018, slapping three rounds of steep tariffs on more than $300 billion worth of Chinese imports. The Republican leader cited Section 301 of the US Trade Act of 1974 for his actions.

During testimony to the House Ways and Means Committee in June 2022, Yellen said the set of Section 301 tariffs that the administration of US President Joe Biden inherited "really weren't designed to serve our strategic interests". However, there has been no substantial change to the tariffs.

On Monday, China's Ministry of Commerce, which has been calling on the US to remove the additional tariffs, said that economic and trade teams from China and the US have maintained "smooth communication".

The report provided an in-depth assessment of the impact of the Section 301 tariffs over the past four years on US imports of four categories of goods — apparel, footwear, travel goods and furniture — from China.

The report also said that for the US to shift away from China as a source of goods was costly and "not always successful".

Based on US government data amplified by responses to a December 2022 survey of US companies sourcing those goods from China, the study found that the impact of the tariffs — higher costs and higher prices — fell on US companies and families.

The tariffs have led to a host of significant indirect costs, including those associated with attempts to establish bifurcated supply chains, according to the report.

In addition, the increased prices on consumer goods have had a greater impact on US households for which those goods represent greater shares of household income, which include households in the lowest 20 percent of income groups, according to the report.

It said that US companies importing apparel, footwear, travel goods and furniture in the aggregate filed thousands of tariff-exclusion requests, at significant internal and external costs to the companies, but most such requests were not successful.

The report did not calculate the total costs to the US importers of the four types of consumer goods over the past four years, but it said that for footwear alone, the tariffs imposed an annual direct cost of at least $250 million, escalating every year to exceed $450 million in 2022.

"No footwear tariff exclusions were granted to mitigate the negative impacts of the tariffs on footwear sourcing companies," noted the report, adding that every one of the 442 footwear product exclusion requests filed was denied.

The same is true for the travel goods, such as backpacks, luggage and handbags imported from China.

The tariffs on these imports increased to 25 percent on May 10, 2019, and pushed the direct cost to importers, to nearly $800 million in 2022, according to the report.

Again, the exclusion process did little to lighten the burden, because of 860 product-exclusion requests filed for travel goods, only 56 (7 percent) were approved, according to the Mercatus Center, a research center at George Mason University.

Limited options

The tariffs have forced some US companies to attempt sourcing out of China, but this "is a costly process that is not always successful", the report noted.

It said that for some product categories, no alternative sources could be found. For example, a medium-sized footwear wholesaler reported it had to keep its entire line in China, subject to the tariffs, because the cost of moving production lines to new suppliers would have been "excessive" and too difficult.

A survey by the US Fashion Industry Association of more than 30 leading US fashion retailers, brands, wholesalers and importers found that nearly 90 percent of the respondents say the Section 301 tariffs directly increased their company's sourcing costs.

"In short, the indirect costs of the tariffs have totaled in the billions and are finding their way into consumer prices. Management of the China 301 tariffs — reporting, analysis, action plans and assessment of success, for example — has been draining on businesses," the report said.

Gary Hufbauer, a senior fellow and trade expert at the Peterson Institute for International Economics in Washington, has estimated the direct impact of removing the tariffs on Chinese imports would significantly cut decades-high inflation in the US.

"The Peterson Institute urged an end to Trump's import tariffs to slow US inflation. Biden considered that idea, which was endorsed by Yellen, but in the end decided against — mainly for domestic political reasons (China hawks in the Republican Party). I believe Biden will return to the tariff cut or elimination idea in 2023," Hufbauer told China Daily.