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Just because I’m curious, I thought I’d ask AI this: What are tariffs and how do they really work? Not surprisingly, my computer’s default AI generated a standard answer that most high school kids who pay attention in class would be able to give: “Tariffs are taxes imposed by a government on imported goods, designed to increase their prices and protect domestic industries.” …etc. etc.
The idea is that if foreign products are more expensive, domestic customers will be more inclined to buy (presumably) cheaper and locally produced products. So, theoretically, the government collects money from foreign entities, and domestic businesses get a sales boost. Everybody’s happy. Right?
Not always. Tariffs may have worked like that when goods were delivered by sailing ships, but it is unfortunately not that simple today. For example, to make products within our own country, we need to generate the materials needed right here, make the machinery required (and all the necessary replacement parts), and have an ample workforce with the expertise to go along with it. (Workforce is its own separate issue in this, so I’ll put that on pause.)
Today’s international trade environment is quite a bit more complex. If all of the “ingredients” noted above are not available domestically, then they have to be imported. If there is a tariff on even some of the supplies, the cost will increase. If the tariffs have strained international relations enough, there can be retaliatory tariffs that are capable of having a much greater impact on domestic prices. Furthermore, some of those countries may just quit buying what we have to sell, or refuse to sell to U.S. companies, and we are then headed down the trade war rabbit hole.
This is why those industries impacted significantly by trade agreements and tariff impositions are concerned about precisely how tariffs are imposed. A thoughtful and meticulously considered tariff policy can indeed benefit local businesses. (How many of our industry participants would characterize our current tariff situation that way?) One has to ask, surely there is enough data available so that tariffs could be judiciously imposed?
In an environment fraught with uncertainties, I’m just trying to strip this complicated situation down to something basic. Our feature, “Trade and tariffs, Part I: The larger picture,” an interview with NCTO president Kimberly Glas, guides us beyond the basics, and offers a well-informed perspective – as current as we could make it, given the administration’s penchant for frequent change.
Glas is in a good position to provide context, identify the salient issues and suggest the means for a better path going forward. I highly recommend that you read both parts, one published now and the second part to be published September 30. Yes, I know that by that time things may have changed again, but we’ll be watching, and we’ll be ready to update as best we can.
Janet Preus is senior editor of Textile Technology Source. She can be reached at janet.preus@textiles.org.