Get ready for another trade war and potentially higher prices on apparel.
In the midst of the protracted trade dispute with China that has led to punitive tariffs imposed by the White House and Beijing, the U.S. is now set to impose 25 percent duties on imports from the European Union (EU), including a considerable amount of apparel from the U.K.
With the World Trade Organization (WTO) ruling this week that subsidies paid by certain EU member states to French aircraft maker Airbus harmed U.S. industry, the Office of the U.S. Trade Representative (USTR) said it was moving ahead with $7.5 billion in tariffs on EU imports.
However, the WTO has also found the U.S. to be at fault in subsidizing Boeing aircraft company and the EU has already drawn up a list of countermeasures, including tariffs on a wide array of consumer goods that sets the stage for a trade war across the Atlantic that could impact prices as much as the dispute across the Pacific between the U.S. and China.
“It is extremely frustrating to see apparel imports from the U.K. included in the retaliation list in the Airbus WTO dispute,” Julia Hughes, president of the U.S. Fashion Industry Association, said. “And even worse, the tariffs on apparel and other products from the EU are 25 percent, higher than the tariffs on aircraft that are the subject of the dispute. This may be perceived as a way to punish the EU, but in fact these tariffs punish American fashion brands and retailers, and ultimately punish the American consumer.”
Similarly, Stephen Lamar, executive vice president of the American Apparel & Footwear Association, said, “Once again we’re very disappointed to see tariffs imposed on imports of clothing coming into the United States.”
Lamar said apparel already faces among the highest tariffs that are charged on any product and adding more tariffs on top of that “is not a solution to give consumers affordable fashion, it’s not a solution to give companies traceability, it’s not a solution to help enforce efficient supply chains that employ Americans.”
Lamar said tariffs simply inject more costs into the system and those costs result in reduced sales, higher prices or lost jobs.
Calling the threatened tariffs “short-sighted and counterproductive,” EU trade commissioner Cecilia Malmström said the desire is to “find a fair settlement.”
“But if the U.S. decides to impose WTO-authorized countermeasures, it will be pushing the EU into a situation where we will have no other option than do the same,” Malmström said.
A source in the U.K. apparel industry said, “Companies will try to absorb what they can, but there will be some increases as it is such a significant figure.”
The U.K. Fashion and Textile Federation (UKFT) noted that the list of products that will be facing a 25 percent tariff ranges from cashmere jumpers to swimwear. This is in addition to the normal duties that will apply.
The U.S. has threatened to introduce the tariffs as early as Oct. 17, and USTR said these tariffs will apply even if the U.K. leaves the EU.
Adam Mansell, CEO of UKFT, said, “At a time when the industry is facing huge uncertainty over the impact of Brexit, it is devastating that one of our key non-EU markets has imposed such significant tariffs on products that have nothing to do with the aircraft dispute. Some of our leading manufacturers will be hit by theses punitive tariffs and that will undoubtedly affect jobs and investment.”
Simon Cotton, CEO of Johnstons of Elgin, a large cashmere knitwear manufacturer in the U.K., and a board member of UKFT, said these tariffs will have a significant impact on the country’s knitwear industry.
“The U.S. is our third largest export market behind Europe and Japan,” he said. “This will have [a] major impact on our knitwear business, as well as the whole of the U.K. knitwear industry. The U.S. consumer has a great affinity with British high-quality knitwear and we urge all parties involved to come to an agreement quickly for the sake of British manufacturers and U.S. consumers.”
For the year to date through July, the U.S. imported $60.94 million in apparel from the U.K., an increase of 9.83 percent from the prior-year period, according to the Commerce Department’s Office of Apparel & Textiles (OTEXA). Wool apparel imports rose 13.94 percent to $19.36 million.
Lamar noted that the only positive from this dispute compared to the one with China is that the U.S. is imposing tariffs under WTO auspices instead of on its own. On the other hand, putting duties on U.K. clothing imports is not related to the aircraft industry that is at the target of the ruling, whereas in the China tariffs, the apparel industry is involved in the argument that the government subsidies it and that it is guilty of intellectual property theft.
Lamar also explained that the U.K. is one of several countries accused of unfairly subsidizing the French Airbus company. As for why U.K. apparel is targeted, he said USTR is clearly choosing British clothing and other high-profile sectors like French wine for the biggest consumer impact.