Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Fashion made possible by global trade
Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute, published his trade fact of the week, looking at “a last useful job for Congress: extend the U.S.’ three small ‘trade preference’ programs — acronyms “GSP,” “AGOA,” and HOPE/HELP” — for lower-income countries.” This piece highlights the importance of the Haitian garment industry for the country’s GDP and how important the Haiti HOPE/HELP program is to these factories in the face of Haiti’s persistent political crisis over the past two years.
The factories persist because of a special trade program — HOPE/HELP, suitably upbeat acronyms for “Haitian Hemispheric Opportunity through Partnership Encouragement”, and “Haitian Economic Lift Program” — created 20 years ago. This waives the pricy 16.5% tariff a cotton T-shirt normally gets, and has unusually simple and easy rules for the sorts of fabric factories can use to make the shirt. Last authorized in 2015, HOPE/HELP is scheduled to end in September next year. So each week the uncertainty about its future prospects grows, and the prospect of its end appears already to be pulling business away. As the ILO’s staffers were writing up their report, one of their [29] factories had shut, and the other two were temporarily closed. This week, only 13 factories appear to be open and producing. So the already substantial worries facing the seamstresses and their employers are growing rapidly more intense.
Now back to Congress, in this session’s last days. Haiti relies more heavily than any other country in the world on American ‘trade preference’ support. Haiti’s is an exceptional case in which loss of trade preference could spark a national economic crisis as well as well as harm to the workers. But an exceptional case, HOPE/HELP isn’t alone. The 24-year-old benefit for Africa, the “African Growth and Opportunity Act” — frequently termed the “cornerstone” of U.S.-African economic relations — is also set to expire next year, and the broader “Generalized System of Preferences” has been in a sort of legal limbo since 2020, with renewal serially frustrated by intense arguments over what we see as relatively minor differences in the wording of eligibility criteria, and then by ‘hostage-taking’ on unrelated topics. Putting off renewal until next year is full of risk: a new Congress with new members unfamiliar with the programs, along with typically slow agency nominations, both make timely renewal hard to imagine and outright lapse fully possible.
With de minimis in the news, the Congressional Research Service published two new reports on Section 321.
The first report is on Imports and the Section 321 (De Minimis) Exemption: Origins, Evolution, and Use. The report discusses why Congress enacted Section 321 in 1938, its policy expansion in the 1990s to “recast Section 321 as a tool of trade facilitation” and increased use in international negotiations, and emerging concerns and legislative proposals aimed at addressing the current de minimis framework.
Since the Entry Type 86 Test and the Section 321 Data Pilot were initiated, an increasing percentage of entries claiming the de minimis exemption have used the programs (Table 5). In 2020, 29% of de minimis entries entered using the Entry Type 86 Test and the Section 321 Data Pilot. By 2023, approximately 79% of de minimis entries had entered the United States under the Entry Type 86 Test and the Section 321 Data Pilot providing additional data, including HTSUS codes on de minimis entries.
As always, the CRS report concludes with considerations for Congress. It notes that Congress does not currently authorize the President to adjust the de minimis threshold to account for inflation and highlights that it is difficult to estimate the potential impact of eliminating Section 321 due to the wide variety of industries and countries involved, but cite a 2024 economic study that concluded eliminating de minimis “would reduce aggregate welfare by $10.9-$13.0 billion and disproportionately hurt lower-income and minority consumers.”
The second publication is an In Focus Report on China’s E-Commerce Exports and U.S. De Minimis Policies. The report provides insight into how China has intentionally grown their e-commerce expansion into the U.S. market through use of Section 321.
CBP estimates that from FY2018-2021, 67.4 percent ($228.3 billion) of U.S. de minimis imports were from the PRC ($149 billion from mainland China and $79.3 billion from Hong Kong). (Figure 2). It estimates that in 2023, total U.S. de minimis imports were one billion parcels valued at about $54.5 billion. The PRC reports $18.4 billion in 2023 de minimis exports to the United States; this amount is roughly one-third of the $54.5 billion U.S. de minimis imports from all sources that CBP reported for 2023. (Figure 1). While CBP data does not delineate which U.S. de minimis imports involve e-commerce transactions, the U.S. International Trade Commission estimated that in FY2022, 83% of total U.S. e-commerce imports were de minimis imports.
In support of the European Commission directive on Corporate Sustainability Due Diligence (CSDDD) that went into effect on July 5, 2024, four organizations joined forces to publish a Handbook for Due Diligence Implementation in the Textile Sector. The organizations involved in the handbook are Policy Hub, the Social and Labor Convergence Program, Fair Wear Foundation, and amorfi. With so many requirements for brands and retailers the CSDDD Handbook provides a valuable “overview of the textile industry’s existing tools, instruments, formats and guidance, and identifies the gaps where further clarification is needed.”
The Handbook:
Be sure to take a look at Annex I, which provides a comprehensive list of the many due diligence tools available for the textile sector.
On Monday, the Center for Strategic and International Studies published an analysis of Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs on China, Canada, and Mexico. Navin Girishankar, President of the Economic and Security Technology Department, and Philip Luck, Director of the Economics Program and Scholl Chair in International Business, discuss how the tariffs against Mexico and Canada “in particular risk undermining U.S. economic security by their direct economic repercussions” and their “inadequacy in motivating policy change by our partners, and their likelihood of degrading partnerships essential to countering global threats, in particular from China.”
The authors also ponder the endgame of this strategy:
The more interesting question is what the administration seeks in exchange for removing tariff threats: point-in-time reductions in the merchandise trade deficit, relatively narrow noneconomic ends such as fentanyl interdiction, or cooperation on the innovation and commercialization of critical and advanced technologies. If it is the third, then the modus operandi will likely need to change. The United States does not have an absolute advantage across sectors and technologies that will drive growth and security. It needs its long-standing partners, particularly its neighbors.
The Government Accountability Office was asked by Senate Environment and Public Works Committee Chairman Tom Carper (D-DE), House Appropriations Committee Ranking Member Rose DeLauro (D-CT), and House Appropriations Interior, Environment, and Related Agencies Subcommittee Ranking Member Chellie Pingree (D-ME) to review issues related to textile waste and recycling, including laws, agency documents, and leading practices for interagency collaboration. GAO analyzed how textile waste affects the environment, how and why the rate of textile waste has changed in the U.S. over the last two decades, and what federal actions should be taken to reduce textile waste, advance textile recycling, and opportunities for interagency collaboration.
GAO published their final report last week with recommendations for Congress, the EPA, the Department of Commerce’s National Institute of Standards and Technology, Office of Science and Technology Policy, Department of State, Department of Energy, and the National Science Foundation.
GAO used three figures, which you can see below, to illustrate the common pathways of discarded consumer textiles in the U.S., the current linear economy for textiles, and an example of a circular economy for textiles.
Figure 1 – Common Pathways for Textiles Discarded by Consumers
Figure 2 – The Current Linear Economy of Textiles in the U.S.
Figure 3 – An Example of a Circular Textile Economy
GOA notes that textile waste has increased due to multiple factors, “including a shift to a fast fashion business model; limited, decentralized systems for collecting and sorting textiles; and the infancy of textile recycling technologies.”
GAO included Goodwill and Helpsy Holdings as examples of organizations that offer collection and donation options for used textiles in the report and Ambercycle, Inc. as an example of a U.S.-based textile-to-textile recycling company.
They highlighted the disposal ban on textile waste in Massachusetts that was passed in 2022. The state identified that 5% of the total weight of their municipal solid waste streams were textiles.
Used textiles were … identified as a valuable commodity due to their reuse and recycling potential. The disposal ban on textiles includes clean and dry clothing, footwear, bedding, towels, curtains, fabric, and similar products.
One of the largest challenges was the lack of accurate data on textile waste because there is no national requirement for states to report municipal solid waste to the EPA. GAO used the EPA’s limited textile waste data and crosschecked it with the ITA’s textile and apparel import data from 2000 to 2023. The EPA does have a pending request with the Office of Management and Budget to collect municipal solid waste data from state agencies and revise its data reporting methods for the upcoming Advancing Sustainable Materials Management: Facts and Figures Fact Sheet, however EPA officials said they do not know how many states will have textile waste data.
The report concluded by noting that the federal government is beginning to plan or implement efforts that reduce textile waste and advance textile recycling, but these initiatives are not coordinated. One of the key recommendations is the creation of an interagency mechanism to improve coordination.
Managing textile waste and recycling is not tasked to one federal entity. Because reducing textile waste and advancing textile recycling is still an emerging issue across federal entities, congressional direction could require them to take coordinated action to reduce textile waste and advance textile recycling. In addition to congressional direction, interagency collaboration is essential to implementing current and future efforts more effectively and efficiently. For example, EPA’s National Recycling Strategy has the goals of increasing the national recycling rate by 50 percent by 2030 and transitioning toward a circular economy nationwide, including for textiles. Increasing interagency collaboration through a mechanism that incorporates identified best practices, such as identifying and leveraging resources, may also help agencies better manage fragmentation amongst their efforts.
Nonfederal stakeholders, including local agencies and nonprofit organizations, are also piloting programs and efforts to reduce textile waste and advance textile recycling. Federal funding to support these efforts, such as grants from EPA and other federal entities, are available. However, information about potential federal sources is not easily accessible on EPA’s website. By making funding information more accessible, stakeholders could use funding toward efforts that help decrease the harmful environmental effects of textile waste or advance textile recycling technologies and infrastructure.
Dr. Sheng Lu, Professor in the University of Delaware’s Department of Fashion and Apparel Studies, published a new analysis exploring the relationship between U.S. apparel import tariffs, U.S. apparel import prices, and U.S. apparel retail prices. We reprint it in full below:
According to the “America First Trade Policy” released in January 2025, the Trump administration aims to leverage tariffs to achieve various policy objectives, from reducing the U.S. trade deficit to countering “unfair” trading practices.
On February 1, 2025, the Trump Administration further announced the implementation of a 25% punitive tariff on imports from Canada and Mexico, along with an additional 10% punitive tariff on goods from China, in addition to the existing duties. With over 98% of clothing sold in the U.S. imported from abroad, U.S. fashion apparel companies are likely to be among the hardest hit by the tariff increase, particularly since Mexico and China are two of the leading apparel-sourcing destinations for the country.
This study aims to explore the dynamic relationship between U.S. apparel import tariffs, U.S. apparel import prices, and U.S. apparel retail prices. Since tariff rates, import prices, and retail prices are interrelated, a vector autoregression model (VAR) was used to analyze their interactions. The analysis was based on monthly data from January 2015 to November 2024 (latest data available), including:
- U.S. apparel tariff rate (data source: USITC; tariff rate=value of calculated duties/custom values)
- Price index of U.S. apparel imports (data source: St. Lous Federal Reserve; January 2015=100)
- Price index of U.S. apparel retail price (data source: St. Louis Federal Reserve; January 2015=100)
- Index of U.S. apparel retail sales (data source: St. Louis Federal Reserve; January 2015=100)
- Consumer Price Index for all U.S. urban consumers (data source: St. Louis Federal Reserve; January 2015=100)
The results show that:
First, from January 2015 to November 2024, the average U.S. apparel tariff rate ranged from 12% to 17%. The fluctuation of the tariff rate during that period was primarily caused by the U.S. imposition of Section 301 punitive tariffs on imports from China, along with fashion companies shifting their sourcing from China to other countries, including members of U.S. free trade agreements.
Second, the average price of U.S. apparel imports rose by approximately 6% from January 2015 to November 2024, which aligns with the U.S. apparel retail price increase of 4%. However, this increase was significantly lower than the 34% rise in the U.S. Consumer Price Index (CPI) over the same period. This pattern shows that despite overall inflation and higher operational costs, apparel exporters and U.S. retailers remained cautious about increasing prices due to intense market competition.
Third, the impulse response function (IRF) indicates that a positive tariff shock (i.e., a tariff increase) would lead to a rise in the U.S. apparel retail price. However, the magnitude of this effect is moderate, with the impact being most felt two months later. Specifically, a one-standard-deviation increase in tariffs would result in a 0.16 standard deviation increase in retail prices during Period 3. In other words, the price effect of the tariff increase typically appears in about two months. However, U.S. fashion retailers usually do not transfer the entire burden of tariffs to consumers, likely because of fierce competition in the market.
Fourth, the impulse response function (IRF) indicates that a positive tariff shock (i.e., a tariff increase) would lead to a slight decline in U.S. apparel import prices. This price decrease would also persist for about three months. Specifically, a one-standard-deviation increase in tariffs would result in approximately a 0.01 standard deviation decrease in apparel import prices through Period 4. This result aligns with previous studies indicating that following the implementation of Section 301 punitive tariffs in 2018, some Chinese exporters agreed to reduce their selling prices to keep sourcing orders.
Fifth, the impulse response function (IRF) further shows that a positive tariff shock (i.e., a tariff increase) could hurt U.S. apparel retail sales in the short to medium term. Specifically, a one-standard-deviation increase in tariffs would lead to approximately a 0.82-2.33 standard deviation decrease in U.S. apparel retail sales from Period 3 through Period 5. This result may be driven by higher selling prices, suppressing consumer spending on clothing.
Additionally, the variance decomposition analysis reveals that, in the short to medium term, about 50% to 80% of the variation in U.S. retail prices is explained by its own past values, underscoring the persistence of retailers’ pricing practices. Meanwhile, U.S. apparel retail sales account for about 27% of the changes in U.S. apparel retail prices. In comparison, apparel tariff changes explained only about 5% of the retail price fluctuations. In other words, market factors, particularly consumer demand, play a more significant role in shaping fashion companies’ pricing decisions than tariffs.
In summary, the study’s findings confirm the interconnections between apparel tariff rates, U.S. apparel import prices, and U.S. retail prices, although these relationships turn out to be more complex and nuanced than previously suggested. It is important to note that only apparel imports from China were subject to tariff increases during the examined period in this study. If tariffs were to increase on apparel products from a broader range of countries during Trump’s second term, the economic impact on U.S. apparel retail prices could be much more significant and persistent.
Kharon recently published a brief on the connection between two Uzbekistan cellulose factories and Russia’s military operations.
Since Russia’s invasion of Ukraine in February 2022, two factories in Uzbekistan have played a critical role in supplying materials to support Russia’s military efforts, including its production of explosives.
According to trade data reviewed by Kharon, the plants—Fargona Kimyo Zavodi MCHJ and Raw Materials Cellulose MCHJ—have supplied more than $170 million worth of cellulose to Russian munitions factories, defense contractors, and other military end users.
The cellulose produced by these factories has been purchased by several major Russian military suppliers, including the state-owned Kazan Federal State Gunpowder Plant, Perm Powder Plant, and Tambov Powder Plant—each of which was sanctioned by the U.S. Department of the Treasury in 2023 for its role in supporting Russia’s defense industrial base.
Last month the OECD published Sustainability initiatives for responsible business conduct, the results of their alignment assessment of Fair Wear Foundation against the OECD’s Due Diligence Guidance for Responsible Supply Chains in the Garment & Footwear Sector. The OECD finds that “the introduction of a new Fair Wear HRDD Policy in 2023 and revisions to the Brand Performance Check (BPC) process took the initiative to a strong finding of partial alignment for its revised standards, including all Step 1 criteria fully aligned and improvements across all six due diligence steps.”
We encourage members to take a look at the strengths of Fair Wear’s standards and the improvements for future monitoring and oversights.
Warwick McKibbin and Marcus Noland from the Peterson Institute for International Economics have published an analysis on Trump’s tariff threats “over illegal immigration and the flow of drugs.” They find that the tariffs would damage all of the economies involved, but include the caveat that “history suggests that Trump may not act on his threats.” The authors conclude that renegotiating USMCA would be preferable to the fallout from Trump’s tariff threats, though the “political uncertainty tempers hope of finding a resolution.” The potential of the threatened tariffs against China coming to fruition are higher, given Trump’s actions during his first term.
Below we share the projected tariff scenarios.
Figure 1 shows that the imposition of the tariff would slow growth and accelerate inflation in all three countries.
Figure 2 shows the damage that an additional 10 percent tariff could inflict on the Chinese and US economies… [and] the results of a retaliation scenario (dotted lines).
The result of combining the threats—a 25 percent tariff on Canada and Mexico and an additional 10 percent tariff on China (which retaliates)—is shown in figure 3.
Ed Gresser, PPI’s Vice President and Director for Trade and Global Markets, published an analysis of the impact and opportunities of tariffs earlier this week. Tariffs and Economic Isolationism: Four Principles for a Response uses the following four principles to “bridge the Constitutional, economic, strategic, and political issues the various Trump proposals raise.”
Gresser highlights the fact that there already are substantial tariffs on key consumer products, including apparel and footwear:
Congress can ease the cost of living by reforming the permanent tariff system, stripping regressivity and sexism out of the clothing, silverware, shoe, and other consumer goods schedules — where hundreds of lines simply raise the prices of cheap mass-market goods not made in the U.S. for decades, and the higher rates imposed on women’s clothes as opposed to men’s extracts $2.5 billion from women each year — and making the functioning of this system transparent.
We encourage USFIA members to read the analysis as we prepare for the possibility of more tariffs.
Ed Gresser, Vice President and Director for Trade and Global Markets at PPI, published his most recent trade fact of the week looking at the world’s container shipping fleet.
Ed Gresser, PPI’s Vice President and Director for Trade and Global Markets, published his trade fact of the week and he uses Maine to illustrate how much damage the IEEPA tariffs can cause.
Susan Collins (R-Maine) thinks of Maine businesses and (noting this week’s Arctic-level Lewiston thermometer readings) fears a sudden spike in home heating bills:
“The Maine economy is integrated with Canada, our most important trading partner. Certain tariffs will impose a significant burden on many families, manufacturers, the forest products industry, small businesses, lobstermen, and agricultural producers. For example, 95 percent of the heating oil used by most Mainers to heat their homes comes from refineries in Canada.”
To put a number on this, Maine bought $2.73 billion worth of fuel oil, mostly for heating oil from Canada last year, so Mr. Trump’s midwinter 10% energy tariff would have hit the state’s 590,000 households with a new $270 million bill. …
What then are the Senators’ options? Their concern about rising costs for farmers and lobster boat captains, cold homes, threats to jobs, and stretched family budgets is actually linked very closely to the first principle of response — defend the Constitution and oppose attempts to rule by decree. The Constitution’s tariff clause is not at all blurry: “Congress shall have the Power to lay and collect Taxes, Duties, Imposts, and Excises.” So Republican Senators and Representatives have no need to plead for special carveouts and exemptions. They have all the power they need to keep potash and heating oil prices down, and to preserve Congress’ constitutional authority from Mr. Trump’s power grab, by voting. They just need to use it.
Ed Gresser, Vice President and Director for Trade and Global Markets at PPI, published his most recent trade fact of the week estimating how the Trump campaign’s 10% worldwide tariff, plus 60% tariff on Chinese-made goods, would impact American families. According to Gresser’s review of current economic analyses,
Two independent nonprofits, studying its probable effect this month, basically agree on what to expect. Mary Lovely and Kimberly Clausing, writing for the Peterson Institute of International Economics earlier this month, estimate an additional $1,700 in additional costs per U.S. household, with the greatest loss of purchasing power in the lowest-income families. Brendan Duke, a former National Economic Council economist now with the Center for American Progress, finds a similar $1,500 increase in costs per middle-income household, with specific examples including $120 in higher payment for fuels, $90 for medicine, $220 for autos and boats, $80 for consumer electronics, and $90 for food. Overall, the Bureau of Labor Statistics’ Consumer Expenditure Survey reports that on average households spent $19,154* on goods in 2022. Against this background, a $1,500 or $1,700 cost increase is something like an 8% or 9% burst of inflation in goods prices, or an equivalently high “tax increase” depending on the angle from which you look at it. Prices are higher either way.
Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute, put out his trade fact of the week, looking at how the proposed measures to save U.S. manufacturing jobs by the Trump campaign would negatively impact the cost of every day household items. Gresser uses the toaster as an example, after Vance said “We believe that a million cheap knockoff toasters aren’t worth the price of a single U.S. manufacturing job” at a Nevada event in July and looks at what rising appliance costs would mean for family budgets.
Gresser also shares how inconceivable it is that the proposed tariff increases of 10% and 60% would bring toaster making home to America:
The U.S. already charges a 5.3% tariff on pop-up toasters (HTS 85167200). None are made here. So as with a lot of U.S. tariff lines, the toaster tariff’s only effect is somewhat higher prices. To get the spectacular ten-fold price-hike that sustains super-toaster making in Japan, Italy, and the U.K., you’d need a 900% tariff or some equivalent policy. (Or, if you need only a five-fold price jump to make less impressive appliances profitable, 400%.) In fact, the additional Trump/Vance tariffs on metals, wiring, buttons, plastics, and other inputs would make U.S.-based toaster-making — including for currently successful producers like Holman Star — harder, not easier. The differentially higher tariff on Chinese-made popups might push some into Vietnam or the Philippines, or possibly Mexico, but that would be the end of it.
In sum, Vance-world looks very expensive for families, not obviously better for workers, and not realistic anyway.
Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute, published his trade fact of the week, examining various countries’ reliance on tariffs as a share of government revenue. Tariffs currently make up 1.8% of the U.S. government’s revenue. The Trump/Vance proposal would bring that up to approximately 25.6%.
No “developed” country now uses tariffs for more than 2.7% of revenue; World Bank tables find Gambia, whose government gets 41.6% of its money from tariffs, the most tariff-reliant country in the world. At 25.6%, the U.S. would be below Gambia, but in the neighborhood of tariff-heavy jurisdictions such as Somalia, the Bahamas, pre-war West Bank and Gaza, Nepal, and Ethiopia — that is, countries too small, politically disordered, and/or poor to operate professional bureaucracies able to assess and collect revenue from broader sources such as income, wealth, or consumption.
Gresser references PPI’s newest paper, It’s Not 1789 Anymore: Why Trump’s Tariff Agenda Would Hurt America by Fiscal Policy Analyst Laura Duffy, which examines why James Madison and Alexander Hamilton did not choose tariffs as the “main early-republic and 19th-century revenue source” and the problems the Trump/Vance proposal would run into. Duffy closes the paper with this observation:
Replacing tariffs with direct taxes on incomes was also a huge step in making American public finance more rational and equitable. … Returning to tariff-heavy policies, as suggested by Trump, would be fiscally irresponsible and counterproductive. Beyond their revenue-generating limitations, tariffs are extremely susceptible to lobbying from protected industries at the expense of other businesses, workers, and consumers. Finally, the distortionary effects of returning to pre-modern tariff rates would be extremely damaging to the American economy and undermine the strong wage and job gains the country has seen in the past three years.
PPI’s Ed Gresser, Vice President and Director for Trade and Global Markets, once again highlights how import tariffs unfairly target women’s clothing in his latest trade fact of the week. Building on his Valetines Day trade fact covering higher tariffs for women’s underwear, Gresser’s latest piece looks at women’s and men’s clothing overall, finding that “combining all the categories, tariff rates on women’s clothing are on average 16.7%, 2.9 percentage points higher than the 13.6% average for men’s.”
Gresser also notes that FTAs don’t help much and may even amplify the issue with restrictive and complex rules of origin. The New Democrat Coalition in the House published an eight-point trade policy plan which includes the goal to “advance equity in trade policy by considering solutions to reduce gender bias and regressivity in the tariff system.”
Gresser writes that the findings point to systemic problems with U.S. tariffs for clothing:
What does this all mean in practice? Last year’s tariff payments totaled $4.7 billion on $31.1 billion worth of women’s clothes, and $3.1 billion for $24.2 billion worth of men’s clothes. Or, in more direct terms, markups and U.S. transport and overhead costs mean that the cost of an average shirt or coat roughly quadruples from arrival at the border to the cashier, the tariff system appears to be raising the price women pay for clothes, relative to men, by an average of an extra dollar per garment. Looking at this another way, a 2018 working paper from the U.S International Trade Commission concluded that the higher rates on women’s clothes — their finding, pre-“301” tariff, was 14.9% for women’s clothes and 12.0% for men’s — plus the fact that women on average tend to purchase more clothing than men, meant that buyers of women clothes shouldered an additional $2.77 billion in tariff burden than buyers of men’s clothes. Gender bias in the tariff system accounted for about $1.8 billion extra burden on buyers of women’s clothing as of 2015, and presumably somewhat more now.
Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute, published his trade fact of the week, looking at who should be able to impose a tax under the U.S. Constitution.
The Constitution gives a pretty clear answer. Its four sentences on trade policy all come from “Article II” (on Congress), with two from Section 8’s “enumerated powers” list, and two from Section 9’ “denied powers” list. The first (see below for the others) says flatly that “The Congress shall have Power to lay and collect Taxes, Duties, Imposts, and Excises.”
Giving Congress this power wasn’t a big Constitutional-drafting controversy. The “taxes, duties, imposts, and excises” clause, in fact, appears to have survived untouched from the first draft presented to the Constitutional Convention on August 6, 1787, to its publication on September 19th. James Madison’s notes of the August 16 session (the day the Convention debated import and export taxes) report none of that day’s 15 speakers arguing that a president should be able to set tariff (or other tax) rates. Why not? A single individual given power to set tax rates could use them to reward self and friends, punish critics, impoverish political or business rivals, etc.. A big Congress with lots of mutually suspicious factions might not find this impossible, but would have much more trouble agreeing to do it.
Gresser points to a few laws that “may have inadvertently provided presidents with something closer to genuinely arbitrary power,” such as the Section 232 and Section 301 of the Trade Act of 1974, the International Emergency Economic Powers Act, and Section 338 of the Tariff Act of 1930. While none of those laws envisions a President deliberately bypassing Congressional authority to levy taxes, Gresser provides two arguments on whether current trade laws override the “Taxes, Duties, Imposts, and Excises” clause and past Supreme Court actions that deal with this issue.
Ed Gresser, PPI’s Vice President and Director for Trade and Global Markets, is focused on who pays U.S. tariffs in his trade fact of the week. He begins with a brief explanation of tariffs since there have been some “puzzling assertions that foreigners might somehow pay tariffs.” Gresser, who was testifying in front of the Joint Economic Committee later that day, used his fellow witnesses’ testimony to help illustrate the three economic results of raising the U.S. tariff rate.
Those three results?
A series of studies earlier this year — including from Erica York of the Tax Foundation and Brendan Duke of the Center for American Progress, both also appearing at this afternoon’s hearing — suggest that a 10% tariff plus a higher rate on Chinese-made goods would cost families $2,200 to $6,000 a year. That’s a jump of at least 10% from the $25,150 the Bureau of Labor Statistics found average families spending on goods last year. The costs of this type of tax increase fall most heavily on low-income families and least heavily on wealthy families — naturally, since lower-income households spend more of their income than average buying goods, and top-end households less.
This is because, all else equal, if you tax one part of the economy but not another, the taxed part gets smaller.... As tariffs on energy, metals, paint, fertilizer, and other inputs raise factory and farm production costs, U.S. manufacturers and agriculture will lose ground to foreign rivals. Construction firms and retailers, meanwhile, lose sales as home prices rise and sticker shocks hit groceries, drug stores, and clothing aisles. … these goods-using parts of the economy gets smaller relative to businesses who spend less on goods — say, real estate and financial services firms — who put much more of their money into investment and services.
Most obviously, countries hit with tariffs — especially in violation of trade agreements – often retaliate. Exporters are then the “cannon fodder” of trade wars — the first pushed into the front line, and the first to fall. … Less obviously, many export losses come without retaliation at all. As we noted earlier this month, the $141 billion in Texas, New Mexico, and Arizona exports flowing south to Mexico last year included tens of billions of dollars in auto parts, semiconductors, and other specialized products sold to Mexican assembly plants. Tariffing or blocking the cars and appliances they produce means they will shrink; then, in turn, they place fewer orders with their Phoenix, Rio Rancho, El Paso, and Houston suppliers, and they shrink too.
Ed Gresser, PPI’s Vice President and Director for Trade and Global Markets, began 2024 looking at the intersection of the upcoming Presidential election and trade in PPI’s Trade Fact of the Week: The price of a 40-inch TV set has fallen by 99% in 25 years.
One of the policy proposals of the 2024 Presidential Campaign is former President Trump’s proposal to enact an additional 10% annual tariff on imports. Former U.S. Trade Representative Robert Lighthizer defended this proposal to the New York Times, saying:
“If all you chase is efficiency — if you think the person is better off on the unemployment line with a third 40-inch television than he is working with only two — then you’re not going to agree with me,” Mr. Lighthizer said. “There’s a group of people who think that consumption is the end. And my view is production is the end, and safe and happy communities are the end. You should be willing to pay a price for that.”
Gresser deftly takes apart this argument by looking at the history of the 40-inch plasma TV. He points out that efficiency in the supply chain has cut the cost of a 40-inch plasma TV from $22,900 in 1970 to less than $400 a few decades later. A 10% tariff on that TV would “set [consumers] back about $20 (or $60 if they wanted to buy three). Over the entire TV-making and -selling world, this would likely put some retail clerks out of their jobs, but likewise wouldn’t affect production.”
Gresser also looks at how President Trump would have the authority to impose new tariff system.
“Constitutionally, only Congress has the right to “lay and collect Taxes, Duties, Imposts and Excises.” Asked by the Times’ political team about how a President could create an entirely new tariff system by himself, the Ambassador cites some existing trade laws that might enable a President to declare a “national emergency” and impose it by decree.”
Earlier this month, Rand released the Forced Labor in Global Supply Chains: Trade Enforcement Impacts and Opportunities report. The research was led by the RAND Homeland Security Research Division, which operates the Homeland Security Operational Analysis Center (HSOAC). The project was funded by the Department of Homeland Security and was “designed to assist DHS in developing analytical capabilities for assessing the impact of its efforts to combat forced labor through trade enforcement and evaluating that impact. The report discusses the methods that we used to evaluate DHS’s impact and presents the result of the analyses, including findings on trade enforcement and recommendations for strengthening enforcement.”
Rand finds that the trade enforcement is making measurable progress, but “stakeholders are encountering impediments that DHS cannot address entirely on its own.” They also say that trade enforcement “cannot change China’s policy on forced labor in the XUAR” alone. Rand offers six recommendations to strengthen trade enforcement:
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The United States Fashion Industry Association (USFIA) is dedicated to fashion made possible by global trade.
USFIA represents brands, retailers, importers, and wholesalers based in the United States and doing business globally. Founded in 1989, USFIA works to eliminate tariff and non-tariff barriers that impede the fashion industry’s ability to trade freely and create jobs in the United States.
Headquartered in Washington, DC, USFIA is the voice of the fashion industry in front of the U.S. government as well as international governments and stakeholders. With constant, two-way communication, USFIA staff and counsel serve as the eyes and ears of our members in Washington and around the world, enabling them to stay ahead of the regulatory challenges of today and tomorrow. Through our publications, educational events, and networking opportunities, USFIA also connects with key stakeholders across the value chain including U.S. and international service providers, suppliers, and industry groups.
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This is the eleventh USFIA Benchmarking Survey and again fashion industry sourcing executives face a litany of challenges. Concern over the economy and inflation, as well as eliminating forced labor, continue to be top concerns in the U.S. fashion industry. This year's respondenents also report an elevated level of concern about the impact of shipping and supply chain disruptions as well as geopolitical tensions.
New for this year is a sharp increase in sourcing executives who are concerned about the protectionist trade policy agenda in the United States, with 45% ranking it a top-5 business challenge, compared with just 15% last year.
Download the complete study here, and see the highlights below:
USFIA's 2024 Mid-Year Sourcing Trends & Outlook Report is out. Members can log-in to the website to download it here.
The top 4 sourcing trends in the mid-year report are:
The mid-year report includes a special section with global trade data prepared by Dr. Sheng Lu, professor in the Fashion and Apparel Studies Department at the University of Delaware. Dr. Lu's findings include the latest changes in China's market share of world textile and clothing exports.
Pattern #2: While China remained the world’s largest clothing exporter in 2023, rising geopolitical tensions and Western fashion companies’ ongoing de-risking efforts pose increasing challenges to its export outlook.
When it comes to apparel, Asian suppliers continue to dominate the U.S. market.
The top seven suppliers ship 76% of total apparel imports. We also see more consolidation of imports from the largest apparel suppliers.
China and Vietnam are the only countries with a double-digit market share, and they supply just under one-half (49.8%) of apparel imports.