Businesses head to DC to make their case against tariffs

·7 min read

Businesses from across the country are making their way to Washington to ask the Trump administration not to put tariffs on products they import from China.

Trade associations and companies plan to tell trade officials how tariffs will raise prices for their consumers, lead to layoffs and could even shutter some American small businesses.

On Monday, the office of the United States Trade Representative will hold public hearings on next round of tariffs on Chinese goods. President Trump has proposed 25% tariffs on $300 billion worth of imports from China, which Citi analysts say will affect nearly 70% of consumer goods.

People pass by a video sign display with the logo for Roku Inc, a Fox-backed video streaming firm, that held it's IPO at the Nasdaq Marketsite in New York, U.S., September 28, 2017. REUTERS/Brendan McDermid
REUTERS/Brendan McDermid

“I think there's a reason why USTR has been careful about holding a hearing before they take any actions — to try to assess what can be known about what the unintended consequences are,” said Erin Ennis with the US China Business Council.

Ennis plans to testify against the tariffs on Tuesday.

“We also have been continuing to urge administration, as well as the Chinese government, to get back to the table to work on the substantive issues,” said Ennis.

The hearings are scheduled to last until June 25, with more than 300 companies and organizations planning to testify.

Seven days of testimony is the longest set of public hearings since the president launched the trade dispute with China back in 2018. USTR heard six days of testimony for the round of tariffs on $200 billion in Chinese goods.

While not every business will get the exemption they seek, Ennis told Yahoo Finance the hearings have had an effect in the past. She pointed to the third tranche of tariffs starting at 10% instead of 25%.

Ennis argues these public hearings are especially important, because consumers will feel the effect quickly.

“These are items that have — in general, from what we've been told by companies — pretty low profit margin, so less ability of companies to be able to absorb or mitigate the cost before they're passed on to a consumer. I think it's really important that, that the administration hear about all of that before they make any decision,” said Ennis.

Pricier laptops, TVs, and shoes

Best Buy (BBY), Roku (ROKU), iRobot (IRBT), VF Corporation, Shoe Carnival (SCVL), the American Apparel & Footwear Association and New Balance are among the groups set to testify on Monday.

According to its request to testify, Best Buy will ask USTR not to put tariffs on laptops, tablets, smartwatches, fitness trackers, computer monitors, televisions, gaming consoles and other consumer devices.

Rick Helfenbein, American Apparel & Footwear Association CEO, told Yahoo Finance prices will go up, sales will go down and jobs will be lost if the administration moves forward with additional tariffs.

He said he’s not sure if the president will listen — but he’ll make his best case at the hearing.

“We’re going to come out swinging and no holds barred asking to be removed from the list,” said Helfenbein.

Helfenbein said he doesn’t think the administration fully realizes the impact of tariffs. “We’re talking about putting tariffs on $550 billion worth of goods,” he said. “You’re going to tariff that and tell us everything is going to be OK? That’s right up there with Mexico paying for the wall.”

Trump continues to defend his use of tariffs despite warnings from the business community. Helfenbein told Yahoo Finance it seems the president will only listen if the market tanks.

Retail earnings are going to get hammered, business is going to get awful, the stock market is going to drop. Nobody’s listening,” said Helfenbein.

In a statement to Yahoo Finance, a New Balance spokesperson said the company is committed to its five New England factories — but it does source some components for domestic manufacturing from China due to a limited supply chain.

“New Balance supports efforts to achieve fair and balanced trade with China and improve the protection of intellectual property, but we believe that punitive tariffs on components used for domestic footwear manufacturing would be ineffective and cause disproportionate harm to U.S. manufacturing interests,” said the New Balance spokesperson.

In comments submitted to USTR before the hearings, Shoe Carnival CEO Clifton Sifford noted footwear already faces higher-than average tariff rates. He said new 25% tariffs could derail the Indiana-based company’s plan to double its size over the next 10 years.

“This staggering cost, which would be paid by Americans, would be difficult, if not impossible, for our company and its customers to absorb. Such a substantial tariff increase would inevitably result in higher prices for our customers who are hardworking, moderate-income consumers on a budget,” said Sifford. “In short, this onerous change in tariffs will hurt the very people that can least afford it and breaks a promise the current Administration made to Make America Great Again.”

Sifford said companies like Shoe Carnival, which employs about 5,000 people, cannot quickly move factories out of China to avoid the new tariff burden.

The chief executive of iRobot, Colin Angle, agreed, saying in prepared remarks that the company has taken steps to move out of China, but can’t entirely relocate in the short to medium term.

In this Thursday, Aug. 25, 2016, photo, iRobot co-founder and CEO Colin Angle holds up a Braava Jet floor cleaner and the remains of a military PackBot, which was destroyed in service with the U.S. military in Iraq, during a tour of the company's headquarters in Bedford, Mass. Angle reflected about his company's transition away from military projects to household robots during an interview with The Associated Press. (AP Photo/Charles Krupa)
In this Thursday, Aug. 25, 2016, photo, iRobot co-founder and CEO Colin Angle holds up a Braava Jet floor cleaner and the remains of a military PackBot, which was destroyed in service with the U.S. military in Iraq, during a tour of the company's headquarters in Bedford, Mass. (AP Photo/Charles Krupa)

Angle said iRobot’s biggest competition is based in China, and the company has seen the impact of Chinese intellectual property theft firsthand.

“We know that the Chinese government provides assistance to those who steal our intellectual property, and have taken legal action to protect iRobot's intellectual property rights,” said Angle.

Determining winners and losers

Still, Angle said, tariffs are not the right approach. The company has already had to raise prices because of the earlier rounds of tariffs. He said cost of additional tariffs will lead to even higher prices, prevent iRobot from hiring more workers and keep the company from investing in research and development.

Angle also said it’s a critical time for the consumer robotics industry and argued tariffs could put American companies behind.

“Long-term winners and losers will be determined in the next three to five years,” he said. “iRobot is expanding product offerings in the promising consumer robotics market with its innovative Braava and Terra products. If forced to dedicate a significant portion of its revenue to tariffs, iRobot will be hampered in continuing the extraordinary innovation that makes it the envy of the industry and provides the U.S. with global leadership. U.S. trade policy should not result in the United States ceding this leadership in the nascent, but extremely promising consumer robotics sector to the Chinese.”

The Consumer Technology Association, a trade group representing the consumer tech industry, is also testifying in Washington. In a prepared statement, the CTA echoed Angle’s comments, saying tariffs “choke U.S. leadership in innovation.”

The CTA said it identified 139 items for technology sector products on the list of proposed tariffs. “The annual import value from China of those items alone totals over $167 billion, over half of the entire value” of the products on the list, and that “a 25% tariff could be catastrophic.”

In its prepared remarks, Roku made a similar argument, saying the proposed tariffs will apply to nearly every product the company and its partners make.

“This will have a detrimental impact on Roku, its TV brand, content and advertising partners, its employees, the millions of consumers who use the Roku platform, and ultimately American leadership in an innovative and expanding global technology,” said Jim Lamoureux, a Roku vice president.

Jessica Smith is a reporter for Yahoo Finance based in Washington, D.C. Follow her on Twitter at @JessicaASmith8.

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