Get ready to pay more in stores.
The latest word from the incoming administration is the team is considering a 10 percent tax on all imports. The move is seen as an attempt by the President-elect to follow through on his tough talk regarding trade, which included repeated jabs at China and warnings that the North American Free Trade Agreement would soon be a thing of the past.
The idea is to encourage Americans to produce more goods here. But that only tells one side of the story. The flip side of this legislation, however, is that it could incite foreign countries to institute their own protectionist trade barriers, which could hurt U.S. exports, and the economy at large.
Initially floated as a 5 percent tax by Reince Priebus, Trump’s chief of staff, it’s now being reported that as recently as last week, the team has doubled that number.
According to U.S. News & World Report, the incoming administration has been warned the move could “start trade wars, anger allies and also hurt the new administration’s effort to boost the rate of economic growth right out of the gate.”
CNN reports the republican establishment is encouraging the Trump team to look at tax reform rather than trade measures to stimulate the economy.
While no one seems to be against the idea of boosting manufacturing at home, the question remains to what degree that is even possible, especially when it comes to apparel.
A recent article in the New York Times outlines the problems the President-elect’s own daughter faced when trying to produce items from her apparel and accessories lines in the U.S. After making initial inquiries about production in the States, a source is quoted as saying Ivanka Trump found it “costly and impractical.”
Even if a blanket tax doesn’t spark a trade war, industry groups say to cripple imports would actually undermine American workers as well. In a report about the global supply chain, the National Retail Federation said “unbeknownst to consumers, imported goods with foreign labels often include significant-but-unrevealed amounts of U.S. content.” The report goes on to encourage lawmakers to “embrace trade policies that recognize that manufacturers and service providers—including retailers—use global value chains to design and manufacture products for sale in the United States and abroad.”
The import tariff is just the latest proposed action that could hike prices for the American public. Border adjustability is another measure that would increase taxes on imports, a fee that, if enacted, would likely be passed along to consumers.