After announcing his decision to impose punitive tariffs on aluminum and steel, President Trump tweeted that “trade wars are good, and easy to win.”
That’s when many of us in the fashion industry pondered, “What is the proper attire for a trade war?”
Trade wars are complicated, sloppy, unkempt, and unwinnable. They threaten the iconic American products you know and love, and they take aim at the wallets of American families.
The apparel and footwear industry is nearly always adversely affected by such protective measures. Even trade wars focused on seemingly unrelated industries, like aluminum and steel, can hurt our global supply chains – which translates into fewer jobs for American workers and higher prices for American consumers.
How so? First, trade wars mean that things get more expensive at home. Tariffs — the main weapon in any trade war, and certainly the one the president seems to favor — mean taxes on goods crossing our borders. The downstream users of those items see their costs progressively increase as they absorb the new tax. By the time it hits the final consumer — often arriving from multiple directions — the impact of the tax is many times greater than when it was assessed at the border. The result is a hidden tax on American consumers.
Apparel and footwear companies find steel and aluminum throughout their supply chains. It’s built into many boots to provide support or reinforcement. It shows up in our stores and distribution centers, and in the containers, trucks, trains, and ships that move our products. It is also baked into the prices of our service providers, and their service providers, who themselves use steel- or aluminum-containing products. That’s to name a few.
Does this mean steel and aluminum tariffs will cause the price of apparel and footwear to increase for Americans? Maybe not. But a separate trade remedy case with China — our largest apparel and footwear supplier — could result in direct tariffs on clothing and shoe products, which are already among the most highly-taxed U.S. imports.
To tax this industry would be to further undo the benefits provided to American families during the past 20 years, which has seen the average price of apparel and shoes actually decline by 5.5 percent — while overall prices increased by a whopping 52.7 percent over the same period. A steel-sized tariff (25 percent) on all apparel and footwear from China would increase the wardrobe costs of a family of four by approximately $400 a year. Coming on top of the tariffs just announced on steel and aluminum, this hidden tax increase would mostly undo the gains that hard-working American families had hoped to receive from the recent tax reform package.
Second, trade wars mean things get more expensive abroad. Because other countries don’t like it when the U.S. imposes new tariffs, they retaliate with tariffs of their own against U.S. products. Our trading partners are already indicating that blue jeans, T-shirts, and other U.S.-made clothes and shoes could be hit with tariffs in response to the steel and aluminum tariffs the Trump administration has announced. Our industry may be targeted — not because of the implicit relationship between aluminum and fashion, but because we make iconic American products and employ Americans in states that are deemed politically sensitive. No matter the reason, the outcome is the same. Faced with higher prices abroad, we lose export sales. And lost export sales mean lost U.S. jobs. Of course, the industry could account for this by shifting production outside of the U.S., but the result would be the same: lost U.S. jobs.
Of course, retaliation comes in all shapes and sizes, and some American brands may find themselves on the receiving end of all sorts of imaginative regulatory harassment in foreign countries. Beyond tariffs, we could encounter endless forms of “soft retaliation,” such as extra bureaucracy and licensing requirements. Such costs and burdens are a brake on economic growth and competitiveness, and would be targeted at U.S. firms, damaging our U.S. job creation ability further. At a time when we are looking to knock down foreign trade barriers and increase our access to foreign markets, it seems counter-intuitive to be inviting the opposite.
So, what’s the best fashion advice for a trade war? There isn’t any. Instead, work hard to prevent it from starting. Trade wars produce only casualties on both sides, as costs and job losses pile up. And if a trade war does break out, work hard to end it. Trade wars can spin out of control as tariffs beget more tariffs, and the tweets over the past week suggest that this could easily happen here. We would do well to remember the Smoot-Hawley tariffs of 1930, and the result of that trade war.
