The United States Trade Representative (USTR) is conducting a four‐​year review of the Section 301 tariffs imposed on imports from China. In 2018, the USTR initiated an investigation into China’s technology and intellectual property practices and concluded that they adversely affected U.S. businesses. As a result, the U.S. imposed punitive tariffs up to 25 percent on over $300 billion worth of imports from China.

As part of the review process, interested Americans could provide comments to the USTR. The almost 1,500 comments filed paint an ugly picture—higher costs and prices, and less investment in workers and capital.

A new study on the impact on American businesses and consumers of Section 301 tariffs specifically on imports of apparel, footwear, travel goods, and furniture paints a similarly bleak picture. All of these goods except furniture are subject to most favored nation (MFN) tariffs—a preferential tariff rate for all World Trade Organization members, except Cuba, and Russia (whose preferential treatment was revoked by Congress in response to the war in Ukraine). Chart 1 illustrates the new total tariffs on these products.

Traditionally, tariffs are paid by importers, so these new rates immediately hit American businesses importing apparel, footwear, travel goods, and furniture. U.S. firms needed to consider whether to share or totally pass on the tariff cost to their customers. In many cases, companies calculated that passing on the tariffs would lose customers. However, absorbing these costs was not sustainable and in order to stay afloat, firms began passing some or all of the new tariff costs to consumers. Table 1 illustrates the direct costs to Americans for apparel, footwear, travel goods, and furniture between 2018 and 2022 as a result of the Section 301 tariffs. The overall cost of the tariffs amounted to over $166 billion.

In response to the tariffs, many businesses tried to change sourcing from China and some succeeded in switching suppliers to other foreign manufacturers. However, most apparel, footwear, and travel goods companies could not change their sourcing.

Some apparel sourcing changed from China to other foreign manufacturers but no manufacturing moved to the U.S. For a variety of reasons, it is not straightforward (or cheap) to shift sourcing. These decisions consider price factors, but other non‐​price factors are also part of the equation. For apparel, so much of the specialized supply chain simply does not exist outside of China, including the skilled labor required to make certain apparel items. Clothing is also often subject to “minimum quantity orders” and for small businesses that need lower quantity orders, alternative sources like Vietnam do not accept small orders.

The United States imports almost all shoes sold in the U.S. market. The tariffs forced some U.S. companies to find new suppliers in other countries (though again, not in the U.S.) but most businesses could not find alternative sources. Similar to apparel, Chinese footwear producers are skilled and have specialized machinery that does not exist elsewhere.

Many travel goods benefitted from the Generalized System of Preferences (GSP), which provided duty‐​free treatment to specific goods from certain countries. However, the GSP expired at the end of 2020. U.S. firms importing travel goods from GSP countries had to choose whether to pay MFN tariffs or source from China and pay MFN tariffs plus Section 301 tariffs. Even with Section 301 tariffs, the expiration of GSP made China a more competitive place to source from. As a result, since 2020 imports of travel goods from China increased.

American furniture companies importing from China are the unique case and more than the other industries, changed sourcing to other foreign suppliers (though again, not to the U.S.). However, changing suppliers was a difficult endeavor, many U.S. retailers explained that Chinese manufacturers are the best for high volume orders and specialty orders where the furniture is custom built with individual selections for fabrics and materials. Moreover, children’s furniture is subject to more onerous U.S. health and safety standards. Changing sources lengthened the time for new suppliers to become certified with U.S. authorities, increasing wait times for orders. While some of these American companies were able to move production away from China, it came at a cost and required these companies to raise prices to consumers.

In the cases of apparel, footwear, travel goods, and furniture imports (though the same story is true for most other products impacted by Section 301 tariffs), American businesses reported that the tariffs cost them and their customers. On the other hand, Chinese firms managed to maintain much of their business with their American customers. Despite the tariffs, as illustrated in Chart 2, U.S. imports of apparel, footwear, travel goods, and furniture increased since 2020.

Finally, apparel, footwear, and furniture are essential products and an unfortunate fact that is seemingly ignored by policymakers is how tariffs disproportionately affect those earning less. While tariffs are broadly regressive (those at the lower end of the wage scale are unduly burdened), the essential nature of apparel, footwear, and furniture means that Americans tend to consume roughly the same amounts of them each month, regardless of whether prices fall or rise (though differences across households surely exist). Tables 2 and 3 illustrate the differences in shares of expenditure on apparel, footwear, and furniture between those in the top and bottom income quintiles before and after the imposition of Section 301 tariffs on these products.

Section 301 tariffs on imports from China harmed American businesses, workers, and the U.S. economy, costing the poorest the most. Moreover, the tariffs do not target those engaging in unfair practices and therefore have been ineffective at achieving the alleged intended goal of changing China’s economic policies.

As the USTR moves through the review process, there is little hope that it concludes to eliminate these tariffs. The Biden administration already maintained the other two tranches of tariffs imposed during the Trump presidency, even swapping some tariffs for complicated tariff‐​rate quotas. However, the evidence is clear and it is past time to remove these tariffs.