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Trade Groups Seek Tariff Relief to Reduce Coronavirus Impact

Posted on Mar. 17, 2020

Over 20 U.S. trade groups are calling on the Trump administration to eliminate section 301 tariffs, saying it is the only way to provide immediate relief from the financial burden of the coronavirus.

Groups including the National Retail Federation, the American Apparel & Footwear Association, and the Footwear Distributors & Retailers of America also seek refunds of the duties imposed by the United States on Chinese imports and paid by U.S. companies, according to a March 13 letter.

The letter says removal of the tariffs could save the United States billions of dollars and would benefit both American companies and consumers, who have been indirectly affected by the duties.

Matt Priest, president and CEO of Footwear Distributors & Retailers of America, told Tax Notes that the footwear sector has been hit especially hard. “While tariffs on total U.S. imports averaged less than 2 percent in recent years, they averaged 10.8 percent on footwear imports over the last decade and climbed to a record 12.3 percent in 2019," Priest said. "In short, the footwear industry — and footwear shoppers — have had to shoulder an unduly heavy tax burden for years, and tariff elimination on footwear is needed just to level the playing field.”

After a tumultuous trade war, the United States and China came together January 15 to sign phase one of a trade deal, but President Trump said tariffs on $370 billion worth of Chinese goods will remain in place until phase two is negotiated.

“Tariffs are taxes that are paid by Americans, so the fact that 'tariff elimination' was not included in the language for the phase-one deal is concerning, especially as there has been no indication that a phase-two deal will happen anytime soon," Nate Herman, senior vice president of policy at the American Apparel & Footwear Association, said in an email March 16. "That said, the economic fallout from the coronavirus could be substantial, and the president has the ability to quickly ease the pressure on American businesses by removing and reimbursing these punitive tariffs.” 

Warren H. Maruyama, a partner at Hogan Lovells and former general counsel in the U.S. Trade Representative's Office (USTR), told Tax Notes that eliminating tariffs “doesn't make any sense at all politically for Trump.” The USTR will probably continue to provide exemptions for pharmaceuticals and medical devices, he said. China recently announced tariff exemptions for imports to help control the coronavirus.

Doreen Edelman, founder and chair of Lowenstein Sandler LLP's global trade and policy practice, said exclusions would be appreciated, but are not enough to keep U.S. companies viable. “These tariffs were intended to hurt China, but trade policy experts knew when the announcement was made that the administration was mixing apples and oranges," Edelman said. "The companies were to 'take one for the team' and take the long view that the policy to alienate China was a good policy. The effect of the virus on retail companies will put the icing on the cake. The resulting stock price decline and private company liquidity will negatively affect the U.S. and global market.” 

USMCA Approved in Canada

The same day the trade groups' letter was published, the USTR welcomed the Canadian Parliament's approval of the United States-Mexico-Canada Agreement. As expected, the USMCA, which replaces the North American Free Trade Agreement, received royal assent March 13. The United States and Mexico have already approved the agreement.

“Now that the USMCA has been approved by all three countries, an historic new chapter for North American trade has begun," U.S. Trade Representative Robert Lighthizer said in a March 13 release. "[The] USMCA is the gold standard by which all future trade agreements will be judged, and citizens of all three countries will benefit for years to come.” 

Trump, Canadian Prime Minister Justin Trudeau, and then-President Enrique Peña Nieto of Mexico signed the USMCA in November 2018, and Mexico ratified the agreement in June 2019, when details of the bill remained up for debate. In December 2019 Canadian Deputy Prime Minister Chrystia Freeland met with Lighthizer, Mexican President Andrés Manuel López Obrador, and Mexico’s deputy foreign minister for North America, Jesús Seade, in Mexico City to agree on updates to the deal. 

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