Starting Thursday, the United States Trade Representative’s Office will begin accepting requests from businesses to have products they import from China excluded from the Trump administration’s tariffs. Many are complaining that having to ask for exceptions, which won’t fix the problems they face in the trade war, is burdensome, as they receive no guarantees of relief and must run their businesses in the meantime.
Businesses have to be able to plan ahead and figure out what to charge for products and services, how much to order in supplies, whether to expand operations and hire, and so on. They need certainty to be able to do that, and when it comes to President Trump’s trade policies, nothing is certain.
“We are certainly hopeful that our petitions are successful, but it will likely be months before we know the outcome, and in the meantime, we need to make important longer-term business decisions,” said Ben Christensen, senior director of development at Simms Fishing, a Montana-based outdoor apparel store. The business is seeking exclusions for waterproof duffle bags and backpacks, arguing that the specific technology involved in making them is only in available in Chinese factories.
Peter Bragdon, executive vice president of Columbia Sportswear, which is seeking exclusions for waterproof shoes, said that uncertainty is a major problem even if the request is granted. “We welcome any process with the potential to eliminate these taxes and regulations on American consumers and employers, but the government is prolonging an unprecedented and untenable amount of uncertainty. The unnecessary uncertainty is the enemy of investment.”
The Trump administration imposed 15% tariffs on $300 billion worth of products from China in September but will allow importers to request exclusions be granted for certain products if they are not available domestically. The administration will also accept new requests for exclusions from the $200 billion worth of products hit with 25% tariffs earlier this year. The U.S. trade representative will make the decisions on a case-by-case basis.
Christensen claims that while getting the product excluded from the tariffs would be better in the long run, to a certain extent, it is beside the point. If they could tell upfront what the price would be, even if it was higher, they could take that into account and adjust accordingly. The uncertain nature of the administration’s tariffs means they cannot do that.
“We launch products about 7-8 months prior to actually shipping our products to customers. We have salesmen who go out and give our retailers an advance preview of the products that are coming so they can write hard orders for them,” Christensen explained. “So, we’ve already written a lot of orders for spring 2020. Normally, once those orders are written, they’re firm.” So, if a tariff or an exclusion from a tariff changed the product’s price, Simms would have to accept any loss.
An additional problem for businesses is, even if an exclusion is granted, the tariff itself could change, Bragdon noted. The Trump administration has threatened to impose impose new tariffs, starting on Dec. 15, of 15% on $156 billion worth of Chinese goods, but hedged on whether it will follow through. The White House has indicated that the tariff threats are needed to ensure Beijing sticks to the agreement made earlier this month. Earlier this month, the administration had been scheduled to hike levies on $250 billion worth of Chinese goods to 30%, up from 25%, but pulled back after negotiations with Beijing signaled cooling tensions.
And those are just the tariffs on China, Bragdon added. Even if his company were to find a way to shift its production chain out of China and avoid the tariffs that way, they can’t be certain that another country wouldn’t also be targeted with tariffs.
“We had the threat of new tariffs against Mexico even though there was a separate trade deal with them being negotiated. There was a threat against India. One day, there was a threat against Vietnam. And, obviously, against Europe,” Bragdon said. “There is simply no reason to feel optimistic about trade policy. Whether that’s the exclusion process or other aspects of it because there is just too much uncertainty, and whatever we say today can be contradicted tomorrow.”
