It’s Election Day in the U.S., and though the uncertainty over who will win the presidency may stretch on for some days, there are things that seem more assured for fashion: little may change when it comes to trade and tariffs.
In fact, by some accounts, the trade war with China (and other countries) could continue to escalate whether President Trump remains or Joe Biden assumes the role. And a reversal of the tariffs that have hit the industry hard in the last two years isn’t likely.
“Whether you’re Republican or you’re Democrat, there’s a lot of interest in pointing fingers at China, especially in an election year and especially coming out of nine months of COVID-19,” Steve Lamar, president and chief executive officer of the American Apparel & Footwear Association said at Sourcing Journal’s virtual summit last month. “I think Democrats are still going to be looking at tariffs as a policy, they’ll probably want to avail themselves of all the same tools. I think the big difference between them and Republicans going forward, whether it’s in Congress or if we see a change in the administration, is how they justify the use of the tools…but I do think we’ll see for a while that continued rhetoric and continued action that puts pressure on China.”
A slew of Section 301 tariffs — rolled out following an investigation that determined China was engaging in unfair practices related to intellectual property and technology transfer — added additional duties ranging from 7.5 to 25 percent on fashion products from the country. Already adverse for a staggering industry, the tariffs have become increasingly challenging for many companies to bear in the midst of the supply and demand crisis spurred by the pandemic.
And while tariffs have been a favorite weapon of leverage for Trump, who has aimed them at targets beyond China (most recently Vietnam, a key beneficiary of increased sourcing amid the fallout with China, as well as the U.K. and France) they aren’t expected to go away, even with the potential entry of a new administration. What’s more, with the product exclusions that relieved fashion players of paying the 301 duties on certain items set to expire on Dec. 31, the new year could bring more tariffs.
“Both houses [of Congress], the Senate and House, had ample opportunity in the last couple of years to take a stronger stance against the 301s, you just really don’t see that,” said Vincent Iacopella, executive vice president of growth and strategy for customs brokerage firm Alba Wheels Up. “I don’t think you get an immediate reversal of 301s in a Biden administration. What I’m hearing is maybe you get a more serious look at an exclusion process, maybe there’s a more serious discussion about manufacturing inputs and maybe you get a policy that replaces 301s, but that would take some time. So I think it’s more of the same for a while.”
As Lamar added, a Biden win would mean tariffs likely stick around, though they may be used as leverage to advance issues tied to things like the environment, workers’ rights and human rights.
“The irritants may change but the tools may stay the same,” he said.
What that means for many in fashion that have sought to reduce their reliance on China for manufacturing and, in turn, lessen their tariff liability, is a difficulty in knowing where to turn for alternative sourcing. Or where to turn for relief from rising costs in line with a consumer who may be spending less.
What many of Iacopella’s customers want to know, he said, is whether the U.S. strategy is “to get out of China and go into Bangladesh and Vietnam, or is the strategy really to shut down all Asian production and target each country individually?”
For now, the question remains without a definitive answer, but with Vietnam’s 301 tariff investigation under way and the U.S. still locked in a back-and-forth battle with Europe over Airbus subsidies and France’s digital service tax (which the U.S. says unfairly targets companies like Google, Facebook and Amazon) — all battles that have been, or could be waged with tariffs — no country is a guaranteed safe bet.
China, though, will remain “public enemy number one from both the Democrat and Republican sides,” according to Ron Sorini, principal of trade law firm Sorini, Samet & Associates.
“If you look at all the issues, for example, the Democrats control the House of Representatives and just recently they passed a bill, 406-3, to tighten the scrutiny of cotton products coming from China, coming from the Xinjiang region,” he said. “So I think, actually, Democrats might escalate the trade war even beyond where it is today.”
And, Trump or Biden, little may take shape anytime soon when it comes to trade anyway.
“I think it’s important to note that if you look back to the last two Democratic presidents, President Clinton and President Obama, there were no major trade initiatives initiated in their first term,” Sorini said.