Retailers ‘Deeply Skeptical’ Keeping Tariffs Will Curb China’s Bad Behavior: RILA

July 22, 2022 by Paul Gluckman|Top News

Any chances that the Section 301 tariffs on Chinese goods would stimulate U.S. importers to shift their supply chains to alternative countries of origin were obliterated when the COVID-19 pandemic struck in early 2020, Jonathan Gold, National Retail Federation vice president-supply chain and customs policy, told the International Trade Commission in a virtual hearing July 21. The ITC completed three days of public hearings July 22 as part of its Tariff Act Section 332 investigation into the tariffs’ economic impact on U.S. industries.

“As we’ve seen throughout the pandemic, the ongoing supply chain challenges from start to finish have limited the ability for folks to shift their supply chains,” Gold said under questioning from ITC Chairman David Johanson. “With the onset of the pandemic, where there was no global travel, you couldn’t go out and actually physically view the factories,” he said.

All the supply chain bottlenecks and logistics costs resulting from the pandemic made it “very difficult to make that change,” Gold said. “It was easier and cheaper just to stay in China and pay the tariffs than to find alternate sourcing.”

Four years into the tariffs, U.S. retailers and importers are “deeply skeptical” that keeping the duties in place “would have any impact” on curbing China’s allegedly bad trade behavior, Blake Harden, Retail Industry Leaders Association vice president-international trade, told Johanson. “As many studies have noted, American companies are the ones paying the tariffs, so this isn’t hurting China,” she said. The “idea” that the tariffs are hurting Beijing is based on “a flawed assumption,” she said.

More than 90% of the tariffs “are borne by U.S. companies,” said Harden, whose group represents Best Buy, Target, Walmart and other big-box retailers. “That’s not going to change if they remain in place,” she said. Customs and Border Protection has collected more than $145 billion in Section 301 tariffs in the four years since they were first imposed, she said. “That revenue is going into the general treasury, and we are now seeing lawmakers introduce legislation tapping that money to fund additional programs.”

The tariffs have become “so entrenched, that they’re now seen as a source of revenue that’s going to be there for the U.S. government,” Harden said. But they’re “being paid on the backs of U.S. companies, U.S. workers and American families, so no, I do not believe that keeping the tariffs in place will in any way change China’s behavior,” she said.

Despite four years of tariffs, China has not lived up to its phase one trade agreement commitments, Gold said, agreeing with Harden that there’s little hope Beijing will change its behavior if the duties are kept in place. “I think we’re better off working with our allies, trying to come up in a coordinated manner, to address the ongoing challenges” of China’s intellectual property theft and forced technology transfer, he said. The “go-it-alone” U.S. policy of confronting Beijing “has yet to work,” he said.

Whether retailers can absorb the tariff costs rather than pass them on to consumers “depends on the size of the retailer,” Gold said when asked by Commissioner Amy Karpel about the tariffs' impact on inflation. “Many small- and medium-size retailers don’t have the flexibility” of larger accounts, “so they have no choice but to pass along that cost,” he said. “That has a significant impact on the smaller guys and their ability to make those sales.”