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

Any chance 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 Thursday.

The ITC completed three days of public hearings Friday as part of its Tariff Act Section 332 investigation into the economic impact of the Section 301 tariffs on Chinese imports and the Section 232 aluminum and steel duties on U.S. industries. A report to Congress on ITC's findings is due by March 15.

“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,” said Gold under questioning from ITC Chairman David Johanson. “With the onset of the pandemic, where there was no global travel, so you couldn’t go out and actually physically view the factories” if pondering a sourcing change, he said.

Four years into the tariffs, U.S. retailers and importers are “deeply skeptical” that keeping the duties “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.

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,” 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.

Despite four years of tariffs, China hasn't lived up to its phase one trade agreement commitments, said Gold, agreeing with Harden there’s little hope Beijing will change its behavior if the duties are kept in place. “I think we’re better off" working with U.S. allies, "in a coordinated manner, to address the ongoing challenges” of China’s intellectual property theft and forced technology transfer practices, 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,” said Gold when asked by Commissioner Amy Karpel about the tariffs' impact on consumer inflationary trends. “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.