Day: May 2, 2024

The event was hosted by the Washington International Trade Association (WITA)

Key takeaways from the panel discussion:

The new punitive tariffs on Chinese steel and aluminum: The overcapacity problem in the steel industry globally could raise national security concerns. While the Biden Administration is more focused on outreach to allies and partners to address the issue collectively, the Trump Administration took a different approach with the Section 232 tariffs specifically targeting China. However, the impact of China-targeted measures could be muted due to the limited amount of US steel imported from China today. The next administration is expected to face the challenge of addressing global overcapacity in various industries. Like it or not, tariffs seem to be one of the few tools available to the US government to tackle these issues directly.

Currency debate:  “Currency manipulation” refers to the deliberate actions taken by a country’s government or central bank to artificially influence the value of its currency in the foreign exchange market. When a foreign government deliberately lowers the value of its currency, it could result in more US imports from that country and hurt the price competitiveness of US exports. While currency manipulation has not been a significant concern in recent years, the recent strength of the US dollar against other currencies, such as the Japanese yen, Chinese yuan, and Vietnamese dong, may reignite debate over the issue. The Biden Administration struggles to fight high inflation using high-interest rates, making it extremely challenging to “devalue the US dollar” in a macro sense. In comparison, the second Trump administration could designate countries of concern as currency manipulators, followed by new retaliatory measures, including tariffs or other trade barriers.

Industrial policy and subsidy: The Biden administration has packaged industrial policy as a core pillar of “Bidenomics,” which has pledged more than $805 billion in new subsidies for semiconductor manufacturing and research, climate and energy investments, and infrastructure spending. In comparison, the Republicans would be more inclined to let market forces determine the outcome of these policies rather than funding them through the government. It is also likely that the second Trump administration will tighten certain rules related to foreign entities taking advantage of US tax credits. However, there could be coordinated investments and supply chain resilience efforts in Biden and Trump’s second term, such as tactical coordination to prevent global subsidy races and disruptions in supply chains.

Trade policy as a tool for other issues: Reviving the Trans-Pacific Partnership (TPP) or similar mid-2010s era trade agreements was slim during the Biden administration. Instead, the Biden administration prioritizes a climate and trade agenda, as evidenced by the launch of a new White House Climate and Trade Task Force. Biden administration will continue to prioritize investments in domestic production capacity while looking outward to use trade to support other non-trade objectives.

In comparison, the Trump administration was more aggressive in pushing back against protectionist trade measures against US products but also less optimistic about the willingness of other countries to engage in good-faith negotiations with the US. Further, Trump 2.0 will likely return to trade policies similar to his first term, including potential tariffs of up to 60% on Chinese imports and an across-the-board tariff of 10% on all imports. Further, there is bipartisan support for increasing tariffs on Chinese goods, considering the deteriorating bilateral relationship. However, a 10% global tariff on imports from countries like Switzerland and Ireland could be more controversial due to potential consumer price impacts and damage to US alliances.

Discussion questions:

1. Any of the aforementioned issues could potentially impact fashion apparel companies? Why?
2. In your view, is it preferable for the textile and apparel industry not to be a focus of US trade policy? Why?
3. What are your top 1-2 takeaways from the panel discussion?