(Bloomberg) -- New Balance Athletics Inc. has long advocated for and benefited from tariffs, competing with Nike Inc. and other footwear companies while still making shoes in the U.S. Now, it’s among the critics of President Donald Trump’s duties testifying at a public hearing that started Monday.
The Boston-based firm said while it supports Trump’s efforts to force China to address intellectual property theft in a trade deal, its U.S. factories are supported by a global supply chain connected to China and built over decades. Duties on soles and other components would hurt the business, as do China’s retaliatory tariffs on U.S. exports, the company said.
Trump’s proposed duties “will risk the viability of our made-in-the U.S.A. shoes,” New Balance Vice President Monica Gorman testified.
About 320 officials from U.S. manufacturers, retailers and other companies and trade groups are set to appear over seven days of hearings that started Monday at the U.S. International Trade Commission before panels of officials from the Office of U.S. Trade Representative and other agencies. While some companies including Rheem Manufacturing Co. support the duties, most are arguing that Trump shouldn’t tax their products.
The footwear firm is among the U.S. companies lining up for the hearing to drive home a now-common point: Trump’s proposed tariffs are bad for business. But the stakes have never been higher, with the latest wave of threatened duties set to hit essentially all remaining imports from China including mobile phones, laptops, apparel and other consumer items.
New Balance has long pushed to supply U.S.-made shoes to the Pentagon and argued against reducing tariffs on imported finished footwear when the U.S. was negotiating the Trans-Pacific Partnership with 11 other nations earlier this decade. But Trump withdrew from the TPP in 2017, and his use of tariffs on goods and components has drawn opposition from a swath of U.S. companies and industries.
While Trump likes to say China is paying the tariffs, economists say it’s U.S. importers that pay them and some of that gets passed to consumers in higher prices. Companies also say they can’t easily avoid them by moving operations outside China, as the president suggests.
China accounted for about 42% of all apparel and 69% of all footwear imported into the U.S. in 2018, according to the American Apparel & Footwear Association. A tariff of 25% will cost a family of four at least $500 more for goods, said Rick Helfenbein, president and chief executive officer.
“Please, please don’t tax the U.S. consumer,” Helfenbein told the panel.
It’s the fourth round of hearings, after Trump levied duties on $250 billion of products last year. As talks on a trade deal with China faltered last month, he ordered a tariff increase to 25% from 10% on $200 billion of goods and targeted an additional $300 billion in products -- including consumer goods the administration spared in previous rounds.
Hallmark, Forever 21
Some executives are coming to Washington to testify for the fourth time, even though many don’t have much hope of success given that Trump sees tariffs as “beautiful” and leverage for a deal -- especially after he said the threat of duties on Mexico produced an immigration pact. Some firms got goods removed from previous tariff lists, only to have them put back.
Retailers including Best Buy Co. Inc., Jo-Ann Stores LLC and Forever 21 Inc.are opposing duties on goods including computer tablets, smartwatches and artificial plants. Hallmark Cards Inc. said greeting cards and Christmas ornaments should be spared because of the impact on retailers, consumers and even the U.S. Postal Service.
Technology products account for more than half the value of the $300 billion, which will raise prices for consumers and could prove “catastrophic” -- especially for small- and medium-size firms, the Consumer Technology Association said.
Element Electronics was able to add jobs after the Trump administration decided to remove LCD panels from a previous tariff list, but if the panels remain on the current list, the company will have to shutter its U.S. plant in South Carolina and move to Mexico or another country, General Counsel David Baer said.
“You have to fix this unintended consequence,” Baer said.
The proposed duties have also drawn opposition from companies that sell products including eyeglasses, fireworks, books, art, vinyl gloves, skis, fishing equipment, seafood, baby cribs and toys.
“Look out, American toy shoppers here comes the Grinch That Tariffed Christmas!” Wendy Lazar, the founder of I Heart Guts plush toy company in California, posted online.
The proposed tariffs would even hit ship-to-shore gantry cranes that handle cargo containers and aren’t made in the U.S., said John Reinhart, chief executive officer and executive director of the Virginia Port Authority. That would affect two cranes costing $19.5 million it ordered in May, diverting funds from other infrastructure projects, he said.
The tariffs could be imposed after a seven-day rebuttal period ends July 2.
Trump is still waiting for a response from Chinese President Xi Jinping about meeting to restart trade talks, economic adviser Larry Kudlow said last week, while warning that Beijing may face consequences it if refuses. Trump has repeatedly threatened to raise tariffs if Xi doesn’t meet with him at the G-20 leaders’ meeting from June 28-29 in Osaka, Japan.
Commerce Secretary Wilbur Ross downplayed the prospect of a major trade deal emerging from a possible meeting between the two presidents, telling the Wall Street Journal in an interview Sunday that the most he thinks will happen is an agreement to resume talks.
Walmart Inc., Target Corp., Macy’s Inc. were among about 660 companies and associations that made a plea last week to Trump not to impose additional tariffs on Chinese goods, and to return to the negotiating table to strike a trade deal with Beijing. Almost 140 apparel and footwear companies also sent a letter to Trump on Monday opposing the duties.
The U.S. Chamber of Commerce is filing comments also urging the administration to finalize a deal that removes the tariffs. Despite attempts to assure Americans there’s a strategy to resolve trade disputes without hurting U.S. interests, “these assurances lack the coherence that would provide comfort to those businesses, farms and workers whose livelihoods are being put at risk,” the chamber said.
(Updates with company comment in third paragraph and other details.)
--With assistance from Ben Holland.
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