The Section 301 hearings continued today with a major shift in message. Representatives from the textile industry spoke in support of tariffs on the apparel and home furnishings imported by fashion brands and retailers.    

On behalf of the National Council of Textile Organizations (NCTO), President and CEO Kim Glas said in order to effectively address China’s trade practices the Administration needs to address the export of end items to the U.S. and added NCTO is “pleased the proposed Tranche 4 includes finished imported items from China, which have the most significant impact on U.S. employment, production, and investment.”

Glas continued to say that including apparel and home textiles in Tranche 4 will lead to re-shoring of production to the U.S. and the Western Hemisphere production platform. “There are literally hundreds of options to source and produce apparel around the world, many of which can be done duty-free from our free trade agreement and preference partners,” says Glas. Further, NCTO attacked the statements from brands and retailers, saying they have “greatly exaggerated” on the potential impact on consumers that might result in higher prices associated with tariffs on end products. Glas also asked the Administration to apply retaliatory tariffs to de minimis shipments under the Section 321 provision.

While Glas supported tariffs on end products, she requests certain inputs such as certain machinery, dyes, and textile components like rayon staple fiber be excluded from the tariff list saying tariffs on imports of manufacturing inputs that are not made in the U.S. raise costs for American companies and makes them less competitive with China.

Companies such as Stein Fibers and Milliken & Company echoed Glas’s statement.  

The mood changed in the afternoon. Representatives from the eyewear, jewelry, footwear, and apparel industry spoke about the harm the additional tariffs would have on their companies and consumers. Speakers delivered powerful messages explaining the difficulty to absorb the costs and the inability to move sourcing due to the worker skillset, labor availability, and raw material availability.

USFIA is set to testify on Monday and will continue to update you as the hearings continue.

Both Washington and Wall Street reacted positively to President’s Trump announcement that the U.S.-China trade talks are starting up again.  Trump confirmed that the two presidents will meet at the G20 summit at the end of the month.  There remains great uncertainty about what comes next … but so long as the two sides are talking there is hope for an agreement that will stop any additional tariffs on imports from China.  

During a Senate Finance Committee hearing, U.S. Trade Representative Robert Lighthizer fielded questions about the impact of the 301 tariffs on U.S. companies.  Both Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) criticized the impact of these tariffs.  Lighthizer tried to downplay the negative impact of the tariffs, saying “And you have to start with the proposition that what we are facing with China is worth having some discomfort on the U.S. side of it.” 

The Section 301 hearings began this week and will continue through June 25^th.  We would like to share a few insights from the hearings with USFIA members. 

The most important message this week is that there is strong opposition to the China tariffs.  Many different types of companies and associations are speaking out.  There are more than 300 people appearing at the seven days of the 301 hearing, and there are 54 separate panels.  The majority of the companies appearing at the hearing oppose the imposition of the 301 tariffs on Tranche 4 products.

During the first two days of the hearings, several panels focused on the impact of higher tariffs on apparel, footwear and accessories companies.   Apparel brands, retailers, and manufacturers of all sizes delivered a similar message; the imposition of tariffs will not solve China’s unfair trade practices, but only harm U.S. companies and consumers. For example, today apparel executives explained the impracticality to absorb additional tariffs, especially when the apparel is already highly taxed.  The bottom line, the cost of additional tariffs will be passed along to the consumer. Many speakers also noted the complexity of the supply chain and the difficulty to move sourcing from China on short notice.  Key factors include the lack of raw materials, capacity, and the lack of time to establish factory relationships that ensure quality and production time.  Interestingly some presenters said that these additional tariffs actually could add to counterfeiting problems by encouraging companies to try to circumvent tariffs and cost increases.

Representatives from the footwear industry delivered a similar message saying an additional 25% tariffs on all footwear would be catastrophic for the industry and won’t be sustainable. Many testified using real life examples of how shoes manufactured in China have saved lives and how the trade supports the American dream.  Additional tariffs will result in many companies passing the cost to consumers or cutting costs of employment, threatening the hard work companies have built their success on. When asked about diversifying their supply chain, witnesses responded there are no other viable options. The increase in tariffs will result in an increase in prices, which results in a decrease in demand, hurting both U.S. companies and consumers.

Another speaker at the hearing was Erin Ennis, Senior Vice President, U.S.-China Business Council.  Many of you will remember that Erin spoke at USFIA’s 2018 annual conference and shared her insights about the U.S.-China negotiations.  This week she spoke out in opposition to the use of tariffs as a negotiating tactic for the issues identified in the 301 case.  She also encourages the U.S. and China to get back to the negotiating table and discuss the substantive issues. In response to questions about whether companies are moving their production, she answered that while a handful of companies are moving production to get out of the tariff battles with the U.S. and China, there are some circumstances where there is no good alternative for sourcing. She also explained that companies cannot indefinitely absorb the higher cost of productions and will have to increase prices, ultimately hurting the consumer.

One of the few companies taking a very different perspective about the 301 tariffs was Parkdale Mills.  Although Parkdale is a major supplier of cotton yarns to fashion brands and retailers, in their statement they express support for putting additional tariffs on apparel and home textiles. “We encourage the Administration to enact penalty tariffs on these items as the most effective way to target China’s predatory trade practices in our sector.”

USFIA will continue to share updates with you while the hearings continue. 

This week American fashion industry leaders and C-suite executives, including many USFIA members, joined a letter to President Trump objecting the Administration’s proposed 25% tariff increase on textiles, clothing, shoes, and accessories (as well as many other products) that are imported from China. The letter was signed by nearly 200 executives from 138 companies.  Thanks to all the companies who signed on, this is an important message to the President that the 301 tariffs will hurt American business. The letter says the new tariffs would have a catastrophic effect, including “higher prices for U.S. consumers, lower U.S. apparel and footwear sales, and lost jobs for American workers in the U.S. apparel and footwear industry.”