Industry Officials Concerned by Trump’s Tariff Pledge as Imports Grow

The U.S. government revealed Tuesday that the nation’s trade deficit widened in October as controversy raged over President-elect Donald Trump’s pledge to impose a 35 percent tariff on imports from companies that move offshore, as part of his effort to keep jobs in America.

Data released Tuesday showed the U.S. trade deficit growing to $42.6 billion in October and came following Trump’s vow in a series of tweets on Sunday.

One prominent House leader has already refused to back such a punitive tariff proposal. House Majority Leader Kevin McCarthy (R., Calif.) reportedly declined to support any legislation to enact such a tariff and voiced concern it could potentially spark a trade war.

The fashion industry has considerable exposure to any disruptions to global commerce. In 2015, the industry imported $111.9 billion worth of apparel and textiles to the U.S.

Industry officials are concerned about Trump’s repeated pledge to impose broader punitive tariffs on imports from China and Mexico, as well as his most recent proposal.

“The vast majority of fashion products are already made outside of the United States and they are often made with U.S. inputs in the Western Hemisphere,” said Julia Hughes, president at the U.S. Fashion Industry Association. “The question is, is the Trump administration really looking at ways to impose penalties only on those products that companies move offshore from here going forward or are they looking at other [areas] to impose additional tariffs on all imports? Obviously there is concern in the industry about potential impact but it’s hard to tell right now. We have tweets but we don’t have substantive proposals to talk about.”

The apparel and textile industry, which moved offshore over the past two decades, has been looking for ways to move more production closer to home, either back to the U.S. or the Western Hemisphere, said Nate Herman, senior vice president of supply chain at the American Apparel & Footwear Association.

“If anything, we are going in the other direction. Many people are looking to try to bring production back to the U.S. or Western Hemisphere.”

Herman said Trump’s broader proposals to impose taxes on Chinese and Mexican imports are a concern.

“Obviously, 97.3 percent of all apparel sold today in the U.S. is imported so that means if you impose a duty on China or reimpose duties on Mexico, it would have an impact,” he said. “We already have low margins in the industry, so that would definitely have an impact. There is no way to shift production overnight.”

David French, senior vice president for government relations at the National Retail Federation, said:“Of course we are concerned about trade and enhancing our ability to deliver high quality goods at price points consumers want. That’s the bottom line. We have a global supply chain. Trade wars are challenging.”

But French said most of what Trump said about imposing tariffs on products from companies that offshore is not aimed at retailers, which for the most part do not have factories in the U.S. and employ hundreds of thousands of workers in the U.S.

In that light, French said his members are not “overly concerned” about Trump’s latest proposals but are watching closely.

“Retail jobs are under pressure and may be under more pressure if there are indiscriminate tariffs put on imported goods or as a result of other policies,” French said.

In the Commerce Department’s new trade data, China and Vietnam were the only top 10 apparel suppliers to the U.S. to post gains in imports in October.

Apparel imports from China rose 7 percent to 1.14 billion square meter equivalents compared with a year earlier, while apparel imports from Vietnam rose 18 percent to 338 million SME compared with October 2015.

Overall textile and apparel imports to the U.S. from the world rose 1.3 percent to 5.6 billion SME in October versus a year earlier. Apparel imports edged up 0.4 percent to 2.4 billion SME, while textile imports increased 2.4 percent to 3.2 billion SME.

Vietnam posted the largest increase in apparel imports of 17.9 percent, while Bangladesh posted the largest apparel import decline of 23.2 percent.

“It demonstrates that our industry is in Vietnam regardless of whether TPP [the 12-nation Trans-Pacific Partnership trade pact that was recently shelved] goes forward or not,” Herman said.

Trump said he plans to notify the 11 TPP partner countries of U.S. withdrawal from the trade deal on the first day that he takes office.

“Vietnam is an important supplier with or without TPP and companies have been doing business in Vietnam and paying full duties based on the fact that Vietnam has production at the right price,” Hughes said. “We’re still bullish and very positive on Vietnam even without TPP.”

The drop in apparel imports from Bangladesh was surprising to industry officials.

Companies have been working in two separate groups to improve safety in garment factories in Bangladesh in the wake of the Rana Plaza collapse that claimed the lives of 1,133 workers and injured hundreds of others three years ago.

“We are keeping a close eye on Bangladesh because of the engagement of companies in the Alliance and Accord so this is surprising to see such a sharp drop,” Hughes said. “It is relatively flat over a longer time period so this might be a one-off.”

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