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Trump has imposed tariffs on roughly $ 350 billion of goods made in China – and despite the change in administration, those tariffs remain in place. U.S. importers have paid more than $ 106 billion to cover the cost of these levies to date, and many of them are now facing skyrocketing shipping costs.
While the Biden administration has conducted a comprehensive review of U.S.-China trade policy, it has said little about resuming trade talks or lifting punitive duties.
Now, pressure on the Biden administration to fix the issue is mounting, as supply chain issues worsen, leading to shortages and higher prices for everything from sneakers to furniture to cars. .
“Tariff relief is a quick and easy way to help the companies most affected by the shipping crisis stay in business and keep employees,” said Steve Lamar, President and CEO of the American Association of Apparel and Footwear.
The trade association sent a letter to the US Trade Representative’s office last week imploring the administration to grant tariff relief. This was followed by a similar demand from four major manufacturers’ associations, acknowledging that supply chain disruptions will require long-term solutions, but arguing that removing tariffs could provide immediate relief.
Supply chain problems, compounded by trade distortions created by tariffs “are hurting the competitiveness of US manufacturers and delaying US economic recovery,” the groups wrote.
Tariffs are in place indefinitely
At a minimum, US importers are urging the Biden administration to reinstate the exemptions some of them have received since 2018. When the duties were first put in place, companies could apply for waivers that were typically granted for items that could not be purchased from an American manufacturer. or elsewhere outside of China.
Some of these exemptions have been extended, such as those for personal protective equipment in high demand due to the pandemic, but many more have expired.
There are currently tariffs on the majority of goods shipped from China to the United States, including items like baseball caps, luggage, bicycles, televisions, sneakers, and a variety of materials used by American manufacturers. . The average rate is 19%, more than six times more than before the start of the trade war in 2018, according to the Peterson Institute for International Economics. Importers pay these tariffs and usually pass some or all of the increased costs on to consumers.
Trump has used tariffs as leverage, intended to hurt China’s economy and pressure Beijing to agree to a new trade deal that addresses unfair trade practices, such as intellectual property theft and transfers forced technology. He and Chinese President Xi Jinping struck what they called a phase one deal in early 2020. Some of those issues have been addressed, but things like subsidies and state-owned enterprises have not been addressed. The deal also lowered the rate of some of the tariffs, but left them in place.
Empty shelves and higher prices
Supply chain issues plague American businesses every step of the way. The rise of the Delta variant and lack of access to vaccines in some countries has resulted in the closure of some foreign factories. There are backlogs at ports, such as the Los Angeles and Long Beach ports where ships wait offshore to dock. Another bottleneck is a shortage of truck drivers in the United States.
All of these issues drive up shipping costs for businesses, which are forced to pay freight charges that can be several times higher per container than they were a year ago. Not only is the container more expensive, there are surcharges if an importer cannot get the goods out of the port quickly enough.
Big companies can find workarounds, like Costco, which chartered three container ships. Small businesses risk paying shipping costs that eat into their profits.
For retailers, fear is setting in as the issues will upset this year’s holiday shopping season. Many experts don’t expect shipping problems to resolve for months or even years to come.
But lifting tariffs could ease some of the pressure.
“The tariff lifting will clearly not affect all lines in LA Long Beach,” said Phil Levy, chief economist at freight forwarding company Flexport. “But what it would do is make life easier for bands that have been going through a very difficult time recently.”
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