China doesn’t pay the tariffs. American businesses and consumers do.
The Big Picture
On August 18, 2017, the Trump administration initiated a Section 301 investigation “to determine whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.”
Since that time, the administration has threatened or imposed punitive tariffs on $550 billion worth of U.S. imports from China. As the source of 40% of apparel, 64% of footwear, and 68% of travel goods sold in the U.S. market, this move has been described as an existential threat to the industry.
State of Play
Currently, members are being hit with a 25% punitive tariff on items included in three lists released by the administration since early 2018 – also known as “Tranches 1-3” that together total $250 billion worth of U.S. imports from China. Products identified on these lists include leather apparel, hats, accessories, textiles, travel goods (handbags, backpacks, luggage), and hangers. These punitive tariffs are in addition to tariffs that were already in place for these products.
The administration also moved forward with a 15% punitive tariff on a "Tranche 4" list of products including shoes, clothes, and all remaining U.S. imports from China totaling $300 billion worth of imports. This list was later split in two, with tariffs implemented on September 1, 2019 (Tranche 4A) and planned for December 15, 2019 (Tranche 4B).
A “Phase One” deal with China was signed on January 15, leading to the Tranche 4A tariff rate being dropped to 7.5% (effective February 14). It also cancelled the proposed implementation of Tranche 4B.
Impact of COVID-19
Amid the Coronavirus (COVID-19) pandemic, AAFA is advocating for stimulus measures that provide liquidity to companies and tariff relief, including tariff payment deferrals. On April 19, President Trump issued an Executive Order on National Emergency Authority to Temporarily Extend Deadlines for Certain Estimated Payments. This provides the administration with the ability to defer duty payments up to 90 days if a company has shown economic hardship as a result of COVID-19. The order does not impact tariffs issued as part of the trade war. For additional information, see:
How to Engage
We encourage all members to take the following steps:
- Contact Congress: It is essential that all members contact their representatives to emphasize how punitive tariffs will impact your business and American jobs. Members can also encourage representatives to pass legislation to rein in the Executive Branch’s tariff making abilities. AAFA has form letters, including a new letter regarding COVID-19, is available in our Legislative Action Center that can be sent today. Additionally, AAFA can facilitate in-person meetings with representatives in Washington.
- Utilize AAFA support materials: AAFA has developed several supporting materials for members trying to keep up with the latest tariff actions and for those looking to diversify supply chains. The following materials and groups require an AAFA membership:
We're very proud to be a part of the AAFA. You guys are doing a tremendous job representing our industry. Thank you very much for all your hard work." - Morris Hidary | M. Hidary & Co.
AAFA's sourcing profiles have been incredibly instrumental to the work we do every day. I can't overstate how critical AAFA has been in helping us keep up with the trade war." - Jennie McCarthy | GIII Apparel
Find AAFA letters and testimony to the administration, as well as press statements, in our News room. Follow us @apparelfootwear and on LinkedIn for our latest announcements and press interviews.
Not an AAFA member? Sign up for the open-industry AAFA Weekly Brief and contact membership@aafaglobal.org to learn how to join and to gain access to member-only resources and committees.