Who Pays for Tariffs?

 

In less than a week (Sept 1), an additional 10% tariff will be imposed on Chinese imports, which now includes apparel and footwear. The US President has repeated time and again that these tariffs will hurt Chinese exporters and will make money for the US government. This overlooks an unfortunate detail: importers here in the US foot the bill for the tariff increase and pass it along to the consumers. And with 40% of all clothing in America imported from China alone, this is no small issue. We are sure to see some negative impacts and increased prices, especially among smaller producers. To make matters worse, yet another 10% will be tacked on come December 15.
 
How will this look to the consumer? A Chinese-made shirt with a $10 manufacturing cost will be imported and marked up the typical double for wholesale ($20) and then doubled again for retail, a $40 shirt. With a 20% tariff imposed on the imported good, that $10 shirt now costs $12, and retails for $48. China doesn’t pay that $8, the shopper does. Maybe the company eats the tariff charge and still sells the shirt for $40, but with increased costs, their margins get slimmer and the employees may feel the effects in decreased wages or job loss. While Walmart and Target will surely be able to minimize the impact these tariffs have on their loyal shoppers, small apparel companies will have a tougher time.
 
While we certainly don’t wish ill on anyone, especially our peers in the industry, on the sidelines at Goodwear we are happy to avoid this whole catastrophe. Importing nothing at all leaves us out of the trade war and exempt from any tariff-induced headaches. We don’t have to raise prices and our customers get to remain happy. Just another benefit of being proudly Made in USA for over 36 years.  

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