It’s time to find a solution to the trade war with China.
Yes, we have said that before. It is a message that USFIA and fashion brands and retailers have shouted loud and clear during the past year while we were facing the potential for new 301 tariffs on consumer products imported from China.
The impact on American fashion brands and retailers is creating more disruption every day. And now we learn on Twitter that the Trump Administration will impose another 10 percent tariff on all remaining imports from China. That means apparel and footwear and home textiles, as well as a host of other consumer products, will be affected with only four weeks’ notice.
Some Administration officials are claiming that the tariffs are only hurting China, and not American brands and retailers (and of course, our customers). But that is not accurate.
Trade disruptions and uncertainty are taking a toll on the fashion industry. The results from the 2019 USFIA Benchmarking Study show very clearly the negative impact on our companies. Companies across the United States said they are very worried about rising costs, and they are feeling less optimistic about the outlook for the fashion industry.
The Benchmarking Study highlights industry concerns about rising costs. The biggest challenge today is the impact of increasing production and sourcing costs. Eighty-four percent of respondents said this is one of their top challenges in 2019.
Clearly many of these cost increases are linked to the 301 action against China. A majority of the respondents to the survey said that the 301 tariffs have increased sourcing costs. But as we look at the data, we see some other insights that are very troubling. Not just costs in China are increasing, but the costs to source in the main alternatives to China—especially Vietnam, Bangladesh and India—also are soaring.
And companies report cost increases throughout the supply chain, including for logistics and transportation.
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We are starting to see the impact on companies. Of course, smaller companies are going to feel the impact first. There is only so long that companies can bear the burden of the tariffs. For many companies they are in the middle—with contracts in place with their Chinese suppliers and also contracts in place with their customers.
That is not sustainable for business.
And while at this point the stories are anecdotal, we are hearing from retailers that when the prices jump to cover the cost of the tariffs, consumers are just not buying.
Second, as USFIA has been telling Washington policy-makers, just the threat of more tariffs and a long-term trade war has an impact on business. One year ago, most executives believed that the threat of tariffs was a tactic to pressure China to reach an agreement with the Trump Administration. Now it seems that the tariffs and the additional $22 billion in duties paid on imports from China may be the real objective.
This year we see that impact very starkly.
Sourcing executives are more cautious today and less optimistic about the five-year outlook for the U.S. fashion industry. One year ago, 84 percent of survey respondents were “optimistic” or “somewhat optimistic” about the outlook for the next five years. This year that number dropped to 64 percent. And one-quarter of the respondents said they are “neutral.” That is a significant drop in optimism for the industry, and the lowest level since we started benchmarking the outlook of fashion industry executives.
Here at USFIA our mission is to support the industry and Fashion Made Possible by Global Trade. We hear the message from industry executives about the negative impact of uncertainty and trade wars. What can we do about it? We encourage all fashion brands and retailers to be active in Washington and join us to explain why this uncertainty and trade policy threats hurt American companies, our employees and our customers.
Please talk with your Member of Congress and with your Senators while they are home. Go to their town halls and constituent meetings to let them know the trade war is hurting.
The message to policymakers and to the President is simple: do not impose new tariffs on any fashion products. Tariffs on fashion products already represent a big tax on American consumers. Tariffs on clothing, footwear and other fashion products are among the highest charged on consumer products, reaching 32 percent for man-made fiber apparel and 67 percent for footwear. During 2018 American fashion brands and retailers paid more than $12 billion dollars in tariffs on apparel and home textiles. And another $3 billion on imported footwear.
The simple truth is that we need the Administration to end the trade war with China. More uncertainty and disruption, combined with rising prices, are bad for the American economy. The Benchmarking Survey highlights the problems—and it was conducted this Spring, before the tariffs rose to 25 percent for Tranche 3 products like luggage, accessories and headwear, and before the threat of an additional 10 percent tariff on apparel and footwear and home textile imports.
The concerns and the disruption to the fashion industry and American families are worse today—let’s not delay a trade deal any longer.