President Trump’s long history of wanting to slap tariffs on “something” is about to boil over. He firmly believes this action will help America. The problem is that the entire logic for implementation is based on a flawed narrative. The concept of free, fair, and reciprocal trade will not be saved or enhanced by targeting steel, aluminum, or intellectual property with tariffs utilized to get fairness. This simply will not work, and while his present anger is focused on China trade, the buckshot approach misses the mark.
The president is utilizing the Trade Expansion Act of 1962, under Section 232, for the presumed benefit of our national security because of our critical need for steel and aluminum. However, the truth behind the exercise is that the Trump administration wants to punish China.
China is not a big (direct) metal supplier to America. Most of our steel and aluminum comes from Canada, and it’s hard to imagine a national security threat with that. Aluminum, however, could be considered a fragile situation simply because there are a limited number of U.S. smelters. Canada and Mexico have been exempted from the tariff, which is good, because (combined) they account for a significant supply of our steel and aluminum.
There is, however, an enormous international outcry, largely because utilizing the Section 232 is seen by most as a masquerade for what may be coming next.
The problem with using Section 232 is that it’s not going to help us, and it’s going to invite retaliation. What’s next you ask? We’ll see the American consumer paying more for product and thus, there go your tax cuts.
For our apparel and footwear industries, we believe that Section 232 is the opening act for something that could affect us directly–a Section 301 action drawn from the Trade Act of 1974. This new potential tariff threat is about the theft of intellectual property and is next up at bat. It will include a variety of consumer products and could include ours. Consumer prices will rise and our industry will suffer.
While apparel and footwear are only 6 percent of everything that is imported, as an industry we already pay 51 percent of all tariffs collected by the U.S. That statistic alone would indicate that our industry is overprotected, overtaxed, and overburdened. More tax for us is not welcome. In fact, our industry often feels that our five-pocket jean was invented by the authorities, so they could keep the fifth pocket as a potential place to put their tax hands.
Tariffs will raise prices to American consumers and that cuts sales, which ultimately creates job loss.
Rick Helfenbein is president and CEO of the American Apparel & Footwear Association and is a strong advocate for a robust U.S. trade agenda and for “Made in USA.” He lectures frequently about politics and international trade and has appeared on CNN, CNBC, FOX, BBC, & BLOOMBERG. Follow him on Twitter @rhelfen