Retailers are worried that a broad reduction in their corporate taxes courtesy of the Trump Administration will be “wiped out” by the looming possibility of new trade tariffs against China.
Retailers and brands like Walmart Inc., Target Corp., Levi Strauss & Co., Gap Inc., VF Corp. and Abercrombie & Fitch, among others, sent a letter to President Trump urging his administration to rethink proposed import tariffs against China as possible retaliation for its alleged “intellectual property theft” from U.S. companies. The retailers are framing possible import tariffs as a negative for “American families” and a “hidden tax” because if the cost of goods imported from China goes up, companies will pass the increase on to consumers.
“Investigating technology and intellectual property policies and practices is critically important to our innovative economy,” the retailers wrote. “Yet were this investigation to result in a broadly applied tariff remedy on imports from China, it would hurt American households with higher prices and exacerbate a U.S. tariff system that is already stacked against working families.”
The retailers went on to support the notion of new tariffs as an affront to average shoppers, arguing “those who can afford less pay more because the U.S. levies the highest tariffs on basic consumer goods,” and noting “basic” clothes and shoes are already subject to import taxes as high as 32 percent and 67 percent, respectively.
“We ask that any remedy carefully consider the impact on consumer prices,” they said.
Industry lobbying groups The National Retail Federation, The Retail Industry Leaders Association and The American Apparel and Footwear Association maintained a similar line in their own joint letter to the administration, adding concerns that benefits from tax reform may be canceled out by import tariffs.
“[The associations] and their membership fought long and hard to help pass tax reform,” the groups said. “The industry is concerned that any benefits from tax reform for retailers and families will be wiped out by broadly applied tariffs on everyday consumer products.”
The groups added that Trump has “unilateral” discretion in retaliating against China.
“We agree it’s time to address China’s unfair trade practices, but we can do so in a way that doesn’t destroy jobs, create uncertainty for businesses and increase every American’s cost of living,” Matthew Shay, the NRF’s president and chief executive officer, said.
Sandy Kennedy, RILA’s president, added, “This is not American industries crying wolf. Higher tariffs will mean higher costs to businesses and in turn higher prices for American families.”
“In addition to increasing costs for American families, this action could result in retaliatory tariffs that target American businesses, resulting in job losses,” Rick Helfenbein, president and ceo of AAFA, added.
After pushing for and praising Trump’s hasty tax reform bill, the bulk of which greatly reduced taxes for corporations and the wealthy while offering relatively meager and temporary reductions in federal income tax for average workers, the retail industry has found itself more at odds with the administration on trade matters.
When, early this month, the administration decided to impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, the NRF and the U.S. Fashion Industry Association roundly condemned the move, worrying that it would lead to a full-blown “trade war.”
Ongoing negotiations surrounding the possibility of an update to the North american Free Trade Agreement with Canada and Mexico, which are exempt from the steel and aluminum tariffs, are also said to be troubled. There’s still a possibility that Trump will decide to pull the U.S. out of the deal entirely, as he was set to do initially.
Benefits of tax reform have also hit a snag due to numerous typos, including one that extends the tax recovery period for business investments in real property to 39 years from 15 years. Fixes will require the passage of an updated bill that will need some Democratic support to pass. Given the current hyper-political climate among lawmakers, there is no timeline for a fix.
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