Study Shows Cheaper Apparel & Shoes Face Higher U.S. Tariffs
The Director of a nonprofit organization project1 has released a study on the U.S. tariff system, which states that although overall U.S. tariff rates are low (averaging 1.3%), tariffs on home goods average about 13% and rise to peaks of 32% for polyester shirts, and 48% for cheap sneakers.
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Says Taxing Home Goods is Regressive, Luxury Items Face Lower Tariffs
According to the study, taxing home goods is generally regressive, as shoes, clothes, linens and similar goods are larger fractions of spending for middle-class and lower-income families; especially those with children. Examining the tariff rates on ten representative home goods, the study found that tariffs favor wealthy shoppers buying luxury versions of the goods (leather shoes, cashmere sweaters, silk shirts, silver spoons, wool/cashmere blankets, etc.), and disadvantage lower and middle-income shoppers as the tariffs on the cheaper versions of the goods (cheap sneakers, polyester shirts, wool sweaters, stainless steel spoons, polyester blankets, etc.) were well above the tariffs on the luxury versions.
Home Goods Are Only 5% of Imports, but Raise Almost 2/3 of Tariff Income
Home goods in general account for about 5% of imports, but with such tariffs twenty times the average rate, they raise almost two-thirds of the tariff income collected at the border. This amounts to about $14 billion of the $26 billion in tariff money collected in 2010. This sum is then amplified twice, first by retail markups and then by sales taxes, as it is passed on to families in stores. The study claims that in total, home goods tariffs now likely cost the public $40 billion a year.
Domestic Employment Reasons for High Tariffs No Longer Apply
Home goods tariffs date to the 1920s, and at that time were meant to protect a large domestic workforce. This section of the U.S. tariff system, however, lost most of its link to employment and production in the last generation. In 1970, home goods industries employed 1.8 million out of 59 million private-sector workers. Tariff rates have remained stable since then, and free trade agreements with lowered tariffs account for only a small fraction of imports. However, home goods manufacturing now employs 0.24 million out of 108 million private-sector workers, often in highly specialized or luxury products.
Two Bills Recently Introduced Would Waive Tariffs on Certain Apparel, Footwear
Two recently introduced bills, the Affordable Footwear Act and the U.S. OUTDOOR Act, would waive tariffs on technical apparel and hiking clothes and most low-cost shoes and sneakers not made in the U.S. According to the study, these bills represent the first real effort since Woodrow Wilson’s 1913 tax reform bills to catalogue tariffs and begin scrapping those which are especially high.
(See ITT's Online Archives or 06/03/11 and 05/27/11 news, 11060326 and 11052725, for BP summaries of the OUTDOOR Act and the Affordable Footwear Act.)
1Edward Gresser, Director of the GlobalWorks Foundation's project called ProgressiveEconomy
Executive summary of the report is available here.