U.S.-based apparel and footwear companies have proudly done their part during the pandemic by transitioning to making personal protective equipment (PPE), particularly face masks for first responders and the American public.
I think we can all agree that producing this PPE, which has been in critical demand, is both commendable and resourceful; however—believe it or not—these same American companies are faced with high tariffs on these much-needed products. Yes, the U.S. government is collecting taxes on these emergency products despite the cost incurred on first responders, medical personnel, and the American people.
Face masks, for instance, are currently taxed 7 percent at the border. Prior to March, face masks from China were taxed an additional 7.5 percent due to the ongoing U.S.-China trade war. Although the U.S. government granted a reprieve for face masks from China once the pandemic hit until the end of the year, they will once again be charged a 14.5 percent tax on the first day of 2021. No matter where American companies source their face masks, these items should not be taxed at such a high rate at a time when the Centers for Disease Control and other health agencies recommend or require their use to stop the spread of highly infectious diseases, like Covid-19.
The pandemic is not the only challenge American companies are facing. The U.S.- China trade war is still going strong, and has been for three-plus years now. American imports from China have been hit with $550 billion in tariffs to date. Meanwhile, as American companies try to mitigate the impacts from the trade war on American consumers, the U.S. government has threatened new tariffs on the second largest supplier of apparel, footwear, and travel goods to the U.S. market–Vietnam.
Over the past several years, Vietnam has become even more important as U.S. companies have implemented diversification strategies away from China. Imposing new punitive tariffs on imports from Vietnam would cause extreme disruption, directly threatening those investments and increasing prices for hard-working American families at the register, while also adding costs on the supply chains that directly support millions of U.S. jobs.
This is not the time to impose new costs on U.S. supply chains, particularly on American job creators who are still recovering from the impacts of the COVID-19 pandemic. Further, new punitive tariffs could make it even harder to source the personal protective equipment that our communities need to safely manage COVID-19 and regrow the economy. Our critical partnership with suppliers in Vietnam would be threatened by the imposition of tariffs.
Aside from high tariffs, there are two critical trade programs that must be renewed by the end of the year to assist in helping American companies recover from the economic downturn:
The Generalized System of Preferences (GSP) program provides duty-free treatment for certain U.S. imports from eligible developing countries. This program allows American businesses to use duty savings to compete internationally, lower costs for American families, employ more American workers and invest in new products. According to the Coalition for GSP, the program saved American companies over $1 billion, including $24 million on Covid-related products last year. Savings like this allow American companies to avoid further layoffs and reductions in wages and benefits.
The other program is the Miscellaneous Tariff Bill (MTB). The MTB allows American companies the ability to eliminate or reduce duties on nearly 2,500 inputs and finished goods not available or manufactured in the United States. As a whole, American companies and manufacturers stand to save more than $1.5 billion over the next three years if Congress passes the MTB legislation before the end of the year. If not, beginning on Jan. 1, the cost will be $1.3 million per day in tariffs on products not made or available in the United States.
Both of these trade programs have bipartisan support in Congress similar to the Caribbean Basin Trade Partnership Act, another trade program that AAFA championed in Congress and that was renewed last month. Congress has the ability to extend both the GSP and MTB programs before the end of the year, injecting some much-needed certainty back into the world of trade.
High tariffs imposed by the U.S. government, combined with Congress’s lack of action thus far to renew two important tariff-saving trade programs, could fuel a very grim outcome for American companies trying to climb out of the economic downturn created by the pandemic. If the high tariffs paid on imports were reduced or eliminated, American companies would be able to use those savings to increase wages and benefits for U.S. workers, avoid layoffs and store and factory closures, and prevent price increases on American families. It is time for the U.S. government to take a different approach to trade policy, one that does not punish American consumers, American workers, and the American communities they support.
Beth Hughes is vice president, trade and customs policy at the American Apparel & Footwear Association, where she oversees AAFA’s Trade Policy Committee and AAFA’s Customs Group – and leads weekly Coronavirus Policy Calls with the AAFA membership. Before joining AAFA, Hughes served for six years as senior director, international affairs at the International Dairy Foods Association. Learn more about AAFA’s efforts at aafaglobal.org/trade and aafaglobal.org/COVID19.