As the U.S midterm elections are underway, the question looms over how the outcome will affect tariffs, consumers, and the apparel industry at large. The duties, which total $250 billion worth of imported goods from China has already cost American businesses 54% more in September alone, according to Sourcing Journal Online.
Will the Midterms Be a Vote Against Tariffs?
Out of registered voters, a quarter believes that the tariffs will protect U.S jobs and the economy, CNBC revealed. On the contrary, half of the registered voters think they will raise costs for consumers and businesses. As U.S citizens make their ways to the polls today, industry experts reveal that despite the midterm election outcome, higher prices are more likely here to stay.
Rick Helfenbein, president, and CEO of the American Apparel & Footwear Association (AAFA) explained, to Sourcing Journal Online,
“If after the midterms tomorrow, if President Trump gets up Wednesday morning and says: ‘You know, this China thing, let’s call it off,’ prices will still go up because people are scared. And when people are scared they leave [places they’re sourcing, like China]. And when they leave, prices go up, so I think there’s no turning around at this point.”
Fear Keeps Prices High
If fear doesn’t keep the prices high, the tariffs already in place will. Apparel was mostly unscathed until the last round of taxes on Chinese goods. The third tranche of duties hit certain parts of the apparel and manufacturing sector such as certain leathers, handbags, and accessories. This caused Wal-mart and Gap to announce a 10% price increase, and others are expected to follow. The jump will hold especially if the 25% tariff comes to fruition January 1st, 2019. Once prices go up, they almost never go back down. The midterms will doubtfully change that.
Harold M. Grunfeld, a partner at customs and trade law firm Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP furthered this by saying,
“I don’t think that the retailers, for all of the leverage that they have, will be able to avoid big price increases,” “They may force some of it back to their vendors—and that would be part of the natural process—and the vendors will try to force some of it back to their factories. But at the end of the day, there will be increased prices whether it happens in the first tranche or the second…at the end of the day, this will happen, and prices will go up at retail.”
In a trade climate that has no guarantees and industry with heavy investment in China, the only surefire way to lower costs would be to diversify the supply chain. Something easier said than getting voters to the polls for the midterms.