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China tariffs to ‘create chaos’ in US fashion supply chain

Starting next week, President Trump’s administration in the US is imposing $200bn (£152bn) more tariffs on Chinese goods, including several fashion and consumer products – a decision that has been strongly opposed by the United States Fashion Industry Association (USFIA).

The organisation said the tariffs would add considerable disruption to the supply chain, and would amount to a tax on consumers.

Tariffs are set to start at 10% on 24 September and rise to 25% by 1 January 2019. USFIA said this would create “additional chaos” in the fashion industry’s supply chains and have a wide-ranging negative impact on consumers, companies and jobs in the US.

It urged the Trump administration to reconsider the decision. Trump has warned that if China takes retaliatory action, the US will immediately pursue a third phase of tariffs of approximately $267bn (£202bn) on additional imports.

“These tariffs on imports of textiles, apparel, and accessories do little to punish China for its intellectual property and technology transfer practices, but do a lot to harm American fashion brands and retailers as well as consumers of their products,” said USFIA president Julia Hughes. “These tariffs are a direct tax on the American consumer—and will affect consumers at all income levels, from the single parent struggling to make ends meet as they purchase back-to-school necessities for their kids, to the consumer of high-end fashion manufactured in the United States, and every American family in between.”

The tariffs will apply to around 6,000 items, including handbags, headwear and textiles.

Neil Saunders, managing director of analyst GlobalData Retail, said: “The new tariffs are bad news for the retail sector, especially as the latest round seems to extend the tax to a vast array of consumer goods. Many retailers will now be faced with a difficult choice of whether to pass the cost increases across to consumers or to take a hit on their margins. The exact response will vary from retailer to retailer but, in our view, both strategies are likely to be used.”

He said the tariffs come at a time of various other cost increases, including more spending on technology and increased costs for logistics and labour.

“Fortunately, the consumer is currently in a position to cope with some mild rises in retail prices,” he said. “However, a rise in prices across the board will likely result in a decline in retail volumes over the longer term, which will be unhelpful to the sector.”

Saunders said some retailers may seek to shift production as a result of the tariffs, but this could be costly and would take time: “Ultimately, while the President may have a sound political motivation for trying to level the playing field in world trade, these policies will bring at least short-term pain to retail and to the consumer.”

 

 

 

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