In today’s world of dramatic and powerful change, trade policy for footwear and apparel is still stuck in the 1930s. Ninety years ago this month, the Smoot-Hawley Tariff Act was signed into law, imposing tariffs on thousands of products across the U.S. At a time of economic uncertainty much like today, then-President Herbert Hoover and the U.S. Congress faced calls to protect declining industries. Their response, in the form of massive tariffs, not only deepened the Great Depression; it cast a lasting legacy on the shoes and clothes we wear today.
Smoot-Hawley resulted in unbelievably high tariffs for footwear and apparel. While most consumer goods that cross our borders are taxed at an average rate of only 1.5 percent, tariff rates in 2019 averaged 12.3 percent for shoes and 14.5 percent for apparel. These tariffs can reach rates as high as 43.7 percent for some of the clothes we wear. For some types of shoes, the rate is an astounding 67 percent.
Because tariffs act as hidden taxes paid by U.S. consumers, this burden hits working-class individuals and families the hardest. In fact, some of the highest rates in the entire Tariff Code fall on low-value shoes and children’s shoes. The Code assigns a rate of 8.5 percent to classic leather loafers, the type of shoes that might be worn by Reed Smoot (R-Utah) and Willis C. Hawley (R-Ore.), the authors of the infamous Smoot-Hawley Tariff Act. But hardworking American families pay a hidden tax rate of 20 percent when they buy a pair of textile upper shoes for their children. The disparity in the Tariff Code, in place for nine decades now, has a real and tangible impact on working-class individuals and families as they face the unprecedented financial hardships and challenges of 2020.
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In addition to high tariffs, many of the concepts found in the tariff code belong to a bygone era. Women’s leather dress shoes generally are taxed at higher rates than men’s leather dress shoes, driving up the cost of women’s shoes. Women and girls are referred to in numerous places of the footwear chapter as “other persons.”
When it comes to apparel, we see similar outdated examples of clothing, mirroring an outdated trade policy. Does anyone wear breeches today? Men’s/boys’ dressing gowns? Petticoats? Waistcoats? Washsuits? Silk swimwear? Corsets or cravats?
Not only is the Tariff Code locked into out-of-touch descriptions, it also maintains the convoluted protection created to maintain the global quota system – even though that tax on consumers was eliminated 15 years ago. While the Tariff Code has been expanded for footwear and apparel throughout the decades, lawmakers have kept the code’s antiquated structure and terms completely intact, like trying to repair an old house by adding room after room onto it.
As a result, today’s designer has to navigate 1930s concepts while trying to create 21st century apparel and footwear technology. The current tariff code incentivizes designing shoes and apparel to meet lower tariff rates rather than focusing designs solely on what consumers want and need. Innovations like Flyknit, athleisure categories, breathable fabrics, high-tech water-resistant materials, and recyclable materials simply were not around in the days of Reed Smoot and Willis Hawley. With so many advances over the past 90 years, Congress and the president must rethink how trade policy impacts innovation in our industries.
The impact of keeping in place these ideas from the 1930s is staggering. Over 90 years, footwear and apparel companies and consumers have paid an incredible $309 billion in tariffs to the U.S. government. They have done so, even though the tariffs do not protect footwear and apparel jobs. Today’s leading footwear and apparel companies have global supply chains that depend on international trade and support U.S. workers. High tariffs negatively impact these American workers, and the U.S. footwear and apparel sectors have urged their removal for decades now. Yet today, President Trump has added more and more tariffs on top of our already-high tariff burden and continues to wield tariffs as his favorite negotiating tool.
As we mark the 90th anniversary of Smoot-Hawley, the president and lawmakers should remember its lasting legacy. Footwear and apparel serve as key examples of why Smoot-Hawley’s idea of high tariffs on U.S. imports has not worked and fails to keep jobs here in the U.S. With the President’s constant rhetoric of more tariffs, we must also remember one of the most unfortunate legacies of Smoot-Hawley: Once a tariff is in place, it is almost impossible to take it away.
Matt Priest is the president & CEO of the Footwear Distributors and Retailers of America (FDRA), the largest footwear association in the U.S. Julia K. Hughes is president of the United States Fashion Industry Association (USFIA), which represents brands, retailers, importers and wholesalers based in the U.S.