The escalating trade war and resulting tariffs are taking a toll on the US apparel industry, driving up prices for consumers and squeezing businesses. The American Apparel and Footwear Association (AAFA) has warned the current tariff policy, particularly the Section 301 tariffs imposed on goods from China, is boosting inflation in the apparel sector. These tariffs, implemented in 2018 under the Trump administration, have led to a 40-year high in clothing and footwear prices.

"Tariffs are taxes paid by US-based businesses and American consumers, not on China or other supplier countries," stated Steve Lamar, president and CEO of AAFA. "These tariffs disproportionately harm lower-income American consumers and female consumers with higher tariffs on lower-priced products and on women's clothes and shoes."

Impact on pricing

A study by the Peterson Institute for International Economics estimated that the tariffs on Chinese goods resulted in a $51 billion increase in annual consumer costs for apparel and footwear. This translates to an average price increase of 5.7 per cent for clothing and 4.8 per cent for footwear. For example, H&M, one of the world's largest fashion retailers, reported a 3 per cent decrease in operating profit in 2019, partly due to increased sourcing costs from China. The company was forced to raise prices on some items to offset the impact of tariffs.

Table: Price increase

Source: Peterson Institute for International Economics

Reasons for tariffs

The tariffs were primarily introduced to address concerns over China's trade practices, including intellectual property theft and forced technology transfer. The US government argued that tariffs were necessary to protect American businesses and jobs. However, experts warn further increase in tariffs could push inflationary pressures and lead to higher prices for consumers. A study by the US International Trade Commission projected that a 25 per cent tariff on all Chinese imports would increase apparel prices by an average of 13.4 per cent. . "Tariffs are not the answer to our trade challenges," said Myron Brilliant, executive vice president and head of international affairs at the US Chamber of Commerce. "They are a blunt instrument that is harming American businesses and workers."

Meanwhile the National Retail Federation has called for the elimination of tariffs, arguing that they harm American businesses and consumers. The US Chamber of Commerce has also advocated for tariff removal, stating that they create uncertainty and hinder economic growth. "The tariffs are a hidden tax on American families," said Matthew Shay, president and CEO of the National Retail Federation. "They are making everyday necessities more expensive and hurting our economy."

The ongoing trade war and the resulting tariffs are having a significant impact on the US apparel industry. While the tariffs may have been intended to protect American businesses, they are ultimately hurting consumers by driving up prices. A resolution to the trade dispute and the removal of tariffs would provide much-needed relief to the apparel sector and American shoppers.