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Fashion and Retail Urge New China Trade Talks and Tariff Action

Tariffs may have taken a backseat when the pandemic enveloped the world’s supply chains in March last year, but now a business coalition is pressing America’s leaders to “redouble efforts” in taking China to task.

On Thursday, nearly three dozen organizations including the National Retail Federation, American Apparel and Footwear Association (AAFA) and Retail Industry Leaders Association united to revive concerns over the ongoing burden of Trump-era China tariffs and their fallout on American businesses, workers, consumer pocketbooks and international competitiveness.

In a letter addressed to United States Trade Representative (USTR) Katherine Tai and Treasury Secretary Janet Yellen, the coalition described the China government as falling short of the commitments it made to when forging the Phase One trade deal in late 2019, a move that was seen as helping to end a protracted and costly trade war.

Though the “Chinese government has met important benchmarks and commitments made in the agreement that benefit American businesses, farmers, ranchers, and workers,” the world’s second-biggest economy still more work to do to ensure that it “meets its existing purchase commitments,” the letter said.

What’s more, the Phase One deal ignored or glossed over many of the issues that the USTR’s Section 301 probe uncovered, the groups said, citing state subsidies and lack of market access for American-made goods among their biggest complaints.

Despite tariffs supposedly holding China accountable, these duties have most negatively affected American importers, with their Chinese counterparts seeing less of a bottom-line hit, according to Moody’s. Studies estimate that Chinese exporters absorbed an average of only 7.6 percent of the U.S. tariff rate, with American importers taking the remainder of these duty expenses on the chin, it found in a May report. A 20 percent U.S. tariff would reduce Chinese exporters’ prices by 1.5 percent and hike domestic importers prices 18.5 percent, for example, meaning nearly 95 percent of the 20 percent U.S. tariff falls on the country’s imports from the so-called “world’s factory,” Moody’s said.

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It’s past time for China and the U.S. to return to the negotiating table, the coalition wrote.

“We appreciate that achieving durable, concrete, meaningful results to level the playing field for American businesses, innovators, workers, and farmers will not be easy, and that past bilateral trade consultations have not yielded hoped-for changes in critical areas,” it wrote. “We also recognize that fully resolving tariffs is unlikely, absent substantially more progress by China on core issues.”

Still, the coalition is pushing the Biden administration to instate product exclusions that lapsed last year, and also wants to see a “new, fair, and transparent tariff exclusion process.”

Successful China trade talks would even further the administration’s pro-America goals, the letter noted.

“Iterative progress and sustained effort with the second largest economy in the world, however, can serve the Administration’s goal of Building Back Better and help to advance its worker- centered trade policy by addressing structural issues in the Chinese economy,” it said.

“We stand ready to work with you to support the implementation of the Phase One agreement and address ongoing challenges and opportunities in the U.S.-China economic relationship,” it added. “In that spirit, we urge the Administration to engage industry and other stakeholders in open, transparent consultations, and develop benchmarks and a timeline for addressing ongoing economic issues with China, leading to more negotiated commitments on China’s structural barriers and full removal of tariffs.”

In response to the letter, the USTR’s office highlighted the American economy’s growth so far in 2021, the “fastest rate in nearly 40 years,” according to Adam Hodge, assistant USTR for media and public affairs, who also noted that “more jobs have been created in our first six months than under any other Administration in history.”

“As we make historic infrastructure investments and Build Back Better, we are conducting a robust, strategic review of our economic relationship with China to create effective policy that delivers results for American workers, farmers and businesses and puts them in a stronger position to compete with China and the rest of the world,” Hodge said.

The coalition’s letter arrives in the wake of continued outcry from the tariff-burdened fashion sector. In March, AAFA urged the newly installed USTR to ditch Trump tariffs, following Footwear Distributors and Retailers of America CEO Matt Priest’s November missive imploring then President-elect Joe Biden to reverse course on “antiquated trade policies” and eliminate the damaging duties.

The industry also was on edge when the USTR floated the possibility of tariffs on Vietnam, now the world’s No. 2 garment exporter, but breathed a collective sigh of relief when Ambassador Tai declined to instate new duties on the Southeast Asian nation after concluding a currency manipulating probe in January. However, the idea of tariffs on Vietnam-made goods isn’t completely off the table, according to new developments last month.