Set aside tariffs and put our best foot forward on trade

Set aside tariffs and put our best foot forward on trade
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It seems that President TrumpDonald John TrumpDem senator says Zelensky was 'feeling the pressure' to probe Bidens 2020 Dems slam Trump decision on West Bank settlements Trump calls latest impeachment hearings 'a great day for Republicans' MORE doesn’t like high tariffs on shoes. 

In remarks on Tuesday, President Trump complained about the high tariffs that Canada imposes on its shoe imports. He said Canadian tariffs are so “massive” that Canadians are having to smuggle them back home by wearing them or “scuffing them up” to make new shoes “look old.”

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What’s old is the practice of putting high tariffs on shoes. While the president learned about this in a recent New York Post article, high shoe taxes have been around for a long time — going back to the Great Depression when Congress imposed punitively high border taxes on U.S. shoe imports as part of the ill-considered Smoot-Hawley tariffs.

 

Canada does indeed charge high tariffs for shoes. But what the president may not realize is that U.S. rates are often higher than those charged by Canada because the Great Depression rates are still in effect today.

U.S. shoe tariffs average at about 11.3 percent — compared with 1.4 percent for tariffs on all U.S. imports — and can hit 67.5 percent for tennis shoes. And because more than 98 percent of all the shoes we wear are imported, this border tax on shoes hits everybody.

What’s worse is that the tax is highly regressive, disproportionately tripping up lower-income Americans since shoes are an everyday good that makes up a larger portion of their budget. 

Conventional wisdom tells us that nobody likes paying high taxes on shoes. Not Canadians. Not Americans. And certainly not President Trump. 

What can be done to avoid a footwear tax burden? 

First, Congress is already one step ahead, having passed a law several years ago to ensure that Americans can import shoes (or any item) valued at $800 or less duty-free. There are some limitations, but the basic allowance applies whether you bring footwear with you or have it sent to you from abroad.

Already well known to global travelers, this law will become an increasingly important feature as e-commerce continues to grow. Recognizing this, the Trump administration has rightly made it a priority to increase the Canadian and Mexican limits to the U.S. standard in the effort to modernize the North American Free Trade Agreement (NAFTA).

Second, a bold move would be to tackle the high duty rates themselves and relieve Americans of the nearly $2.9 billion in duties they face every year — more when calculated at retail. U.S. participation in the Trans-Pacific Partnership (TPP) would have helped immensely.

More than a quarter of those footwear duties are paid on shoes we import from Vietnam — a TPP partner. Most of this cost would have been zeroed out on the first day the agreement took effect.

Members of Congress have also explored numerous ways to reduce footwear duties. Bipartisan legislation is currently pending in Congress that would add a number of footwear styles to the Generalized System of Preferences (GSP) program to enable conditional duty-free importation from countries like Brazil, Cambodia or Indonesia.

This follows a successful model used recently on travel goods — items like backpacks and purses — which now saves American consumers more than $75 million a year. Because such efforts are generally written to avoid relaxing duties on the limited categories of footwear still made in the U.S., the goal is to provide benefits to consumers without threatening U.S. manufacturers. 

Third, calling a halt to the seemingly endless round of tariff threats would be vital as well. It is true that this “Trump Tax” has not been imposed directly on U.S. imports of footwear. But the president has imposed tariffs on items — such as steel — that get used in footwear production.

Moreover, this week’s threat to impose tariffs on as much as $450 billion worth of U.S. imports from China — the source of about 71 percent of our shoes — certainly puts the footwear industry on edge.

Further, retaliation by some of our trading partners will lead to price increases on footwear imported into Europe from the U.S. this week. Although this primarily hurts customers in Europe, it does hit U.S. shoemakers as well.

The president was right to call attention to the antics Canadians must go through to avoid high tariffs on footwear. But he missed the point. High tariffs imposed by the U.S. are paid by hardworking American families, not Canadians. It’s time to put our best foot forward and focus on this hidden tax. 

Stephen Lamar is Executive Vice President at the American Apparel & Footwear Association, an American industry trade group representing hundreds of clothing, footwear and sewn products companies and their suppliers. Lamar is also president of the Washington International Trade Association, an organization that provides a forum for discussion of international trade policy and related issues.