U.S. firms say China tariffs will raise costs, with few sourcing alternatives

By David Lawder WASHINGTON (Reuters) - A broad range of U.S. companies told a hearing in Washington on Monday that they have few alternatives other than China for producing clothing, electronics, and other consumer goods as the Trump administration prepares 25% tariffs on remaining U.S.-China trade

Reuters June 18, 2019 01:05:35 IST
U.S. firms say China tariffs will raise costs, with few sourcing alternatives

US firms say China tariffs will raise costs with few sourcing alternatives

By David Lawder

WASHINGTON (Reuters) - A broad range of U.S. companies told a hearing in Washington on Monday that they have few alternatives other than China for producing clothing, electronics, and other consumer goods as the Trump administration prepares 25% tariffs on remaining U.S.-China trade.

The comments came on the first of seven days of hearings that began on Monday, held by the U.S. Trade Representative's Office (USTR), on President Donald Trump's plan to hit another $300 billion worth of Chinese imports with tariffs.

Sourcing from other countries will raise costs, in many cases more than the 25% tariffs, some witnesses told a panel of U.S. trade officials from USTR, the Commerce Department and other federal agencies.

Mark Flannery, president of Regalo International LLC, a Minnesota-based maker of baby gates, child booster seats and portable play yards, said that pricing quotes for shifting production to Vietnam - using largely Chinese-made steel - were 50% higher than current China costs, while quotes from Mexico were above that.

"Currently there's no country manufacturing metal baby gates outside of China," Flannery said.

Child safety products such as car seats were spared from Trump's previous tariffs on $200 billion worth of Chinese goods, imposed in September 2018. But in the drive to pressure China in trade negotiations, USTR put them back on the list, along with other products spared previously, from flat-panel televisions to Bluetooth headphones.

The proposed list, which will be ready for a decision by Trump as early as July 2, includes nearly all consumer products, and could hit Christmas sales hard, particularly cell phones, computers, toys and electronic gadgets.

Marc Schneider, chief executive of fashion footwear and apparel marketer Kenneth Cole Productions, said 25 percent tariffs would wipe out the company's profits and cost jobs. With China producing 70 percent of the shoes bought in the United States, there were no alternatives, including India and Vietnam, that could match China's quality, price and volume, he said.

"We're going to lower the quality of footwear, raise prices and accomplish nothing by moving it around to other countries," Schneider said.

In a letter addressed to the USTR ahead of Monday's hearing, clothing retailer Ralph Lauren Corp asked for apparel and footwear to be removed from the tariff list, arguing that a rise in duties would lower sales and lead to U.S. workers losing their jobs.

Jean Kolloff, owner of cashmere importer Quinn Apparel, said her reason for opposing the tariffs was more geographical - the Alashan goat that produces light-colored cashmere wool is only found in China's Inner Mongolia region.

"We searched for similar species of goat in an attempt to copy the hair from this animal in other countries or even domestically, but to no avail," she said.

DETERIORATING RELATIONS

The tariff hearings are underway amid a severe deterioration of U.S.-China relations since Trump accused Beijing in early May of reneging on commitments that had brought the world's top two economies close to a deal to end their nearly year-long trade war.

Since then, Trump raised tariffs to 25% on $200 billion of Chinese goods. The $300 billion list of products being reviewed in the hearing would bring punitive tariffs to nearly all remaining Chinese exports to the United States.

Trump has said he wants to meet with Chinese President Xi Jinping during the June 28-29 G20 leaders summit in Japan, but neither government has confirmed a meeting.

The list of more than 300 scheduled witnesses includes representatives from retailer Best Buy, toy maker Hasbro Inc, vacuum cleaner maker iRobot, faucet maker Moen, and other firms and trade groups in a diverse range of industries.

Not all of the witnesses on the first day of the hearing were opposed to the tariffs. Mike Branson, president of Rheem Manufacturing Co's air conditioning division, asked Trump administration officials to close a loophole that was allowing Chinese firms to skirt air conditioner tariffs by shipping condenser and air handler units separately.

This allowed the units to be imported duty free as parts, rather than as completed units that were subject to tariffs. Domestic manufacturers had ample capacity to make these products, Branson said.

(Reporting by David Lawder, Additional reporting by Chris Prentice and Jason Lange in Washington and Uday Sampath in Bengaluru, Editing by Rosalba O'Brien)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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