The US-China trade war
Evaluation study of potential impacts on the
FOOTWEAR INDUSTRY
by
Portuguese Shoes
The US–China trade war
Copyright
APICCAPS • APRIL 2019
Who we are
World Footwear is an initiative of APICCAPS, the Portuguese Footwear,
Components and Leather Goods Manufacturers’ Association, and it includes two
communication channels: an annual edition of the World Footwear Yearbook and
an electronic platform with updated industry news (www.worldfootwear.com).
The first edition of the World Footwear Yearbook, a comprehensive report
that analyses the main trends within the footwear sector around the world,
was released in September 2011, with new updated editions published on
a yearly basis. Each report is published with the most updated data up to
the previous year and analyzes the position of the relevant countries of
the footwear industry in terms of different variables (Production, Exports,
Imports and Consumption) and evaluate the strategic positioning of the
different sector players. The World Footwear Website disseminates all
relevant news about the worldwide footwear industry on a daily basis.
Disclaimer
This report was prepared by the Research Centre in Management and Applied
Economics (CEGEA) of Católica Porto Business School for APICCAPS.
Although due care has been taken in the preparation of this report, APICCAPS
cannot guarantee the accuracy or completeness of the report and cannot be
held responsible for any error or the opinions expressed herein.
www.worldfootwear.com
Contents
1
Recent developments in the
United States trade policy
05
2
Economic theory on
the impacts of tariffs
07
3
Quantitative estimates
of the impacts of tariffs
10
4
Potential effects of the
US-China trade war on
the footwear industry
13
5
References
16
The US-China trade war
www.worldfootwear.com04
Even if the process was not continuous or linear, for most of the twentieth
century there was a trend towards the progressive integration of markets
that paved the way to an unprecedented rise in living standards worldwide.
The establishment of a multinational framework to regulate and facilitate
international trade – through the General Agreement on Tariffs and Trade
(GATT), first, and the World Trade Organization (WTO), later – was a
cornerstone of this process and allowed a dramatic decrease of barriers to
trade, especially tariffs. In the US, for example, the duties collected on dutiable
imports fell from 49.2% in 1900 to 4.8% in year 2000.
The US were among the key proponents and supporters of the liberalization
of international trade. However, with the election of President Trump, this
country’s stance seems to have changed. The US have recently been increasing
tariffs selectively, targeting specific products and countries, renegotiating
trade agreements, and President Trump has claimed that “trade wars”
are beneficial and can be easily won. Many fear that the current apparent
preference of the US for bilateral negotiation of trade issues may jeopardize
the multilateral framework that, its limitations notwithstanding, has been so
successful.
This paper analyses the relevance of these developments for the footwear
industry. It starts with a brief description of the recent changes in the US
trade policy (section 1), followed by a presentation of the main results in the
economic theory on trade tariffs (section 2) and a summary of recent studies
that have tried to quantify the impacts of the ongoing changes in trade
policies around the world, particularly in the US (section 3). Finally, section 4
discusses the potential effects of an extension of the US-China trade war to
the footwear industry.
1891 2011
60
40
20
0
Source: US International Trade Commission
Figure 1 – United States: Duties collected / Dutiable imports
Potential impacts on the footwear industry
“Trade wars are beneficial
and can be easily won”
Donald Trump
The US-China trade war
In 2018, the US have made or suggested noteworthy changes in their trade
policy centred on four groups of products:
i. Solar panels and washing machines – in January 2018, President Trump
approved tariffs on 8.5 billion dollars of solar panels imports and 1.8 billion
dollars of washing machines imports. The tariff on solar cells was set at
30% in the first year, declining 5 percentage points per year to 15% by the
fourth year; the washing machines’ tariff was set at 20% on the first 1.2
million imported units, increasing to 50% on machines above that number,
percentages that will decline to 16% and 40% in the third year;
ii. Steel and aluminium – invoking national security arguments, in March
President Trump announced tariffs of 25% on steel imports and 10% on
aluminium imports, covering an initially estimated value of 48 billion
dollars. In the case of Turkey, these tariffs were doubled in August;
iii. Technology and intellectual property – also in March, the US invoked
unfair commercial practices by China, to announce tariffs of 25% on a
list of Chinese products covering 50 billion dollars of imports, including
1. Recent developments in the
United States trade policy
Recent developments in the United States trade policy