The letters have been sent — and they keep coming.
U.S. President Donald Trump is making good on his promise to continue to roll out new tariff rates for America’s trade partners, taking to Truth Social again on Wednesday to release details about trade rules for a handful of countries after announcing tariff rates for a dozen nations on Monday.
In separate letters, Trump set duty rates for the Philippines (20 percent), Brunei (25 percent), Iraq (30 percent), Libya (30 percent) and Sri Lanka (30 percent), including a provision stating that any instances of transshipment, or rerouting shipments that originate elsewhere through local markets as a means of evading tariffs, will incur higher tariffs. If the countries opt to retaliate with their own duties against the U.S., those rates will be tacked onto those established by the president this week.
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Separately, Trump targeted Brazil with a bloated 50 percent across-the-board tariff, citing the government’s indictment of former president and Trump ally Jair Bolsonaro, who now faces trial for a plot to overturn the results of the country’s 2022 election, which he lost. Trump also took issue with Brazil’s recent ruling that U.S.-headquartered social media platforms should be held accountable for certain user content.
The stilted nature of the president’s tariff announcements, along with the lack of specificity surrounding the new rules and the pauses or delays in implementation, have sowed confusion among industry insiders.
Monica Gorman, former special assistant to U.S. President Joe Biden for manufacturing and industrial policy (and a veteran supply chain expert for brands like Gap, New Balance and American Eagle), told WWD’s sister publication Sourcing Journal she believes the fashion sector has been swept up in the tide of Trump’s tariff policy as the administration focuses on regulating other industries it considers more critical to national security, from semiconductors to automotive, energy and pharmaceuticals.
“There’s clearly a focus on critical sectors and the need to de-risk,” and some rightful concern about China’s “chokehold” on the global supply chain for essential inputs like rare earth minerals. “All of that is going on, and textiles and apparel — while critically important to the military and the American consumer — is not one of those industries of focus,” she said.
“I think on some level the industry is getting caught in the middle of broad policy discussions. It’s also one of the industries that does face high [Most-Favored-Nation tariff] rates, which most industries do not, and so that is not going to be top of mind for policymakers unless they are familiar with the industry,” Gorman said.
Footwear Distributors and Retailers of America president and chief executive officer Matt Priest on Wednesday wrote an open letter to U.S. Trade Representative Ambassador Jamieson Greer elucidating that point, and imploring the department not to stack new tariffs on top of already heavy duties on footwear.
“For decades, the footwear industry has operated under a significant tariff burden larger than almost any sector. While the average tariff rate on consumer goods is just over 2 percent, the average footwear tariff rate is 12 percent before any new tariffs are added,” he wrote.
According to Priest, tariffs on kids’ shoes are astronomical, often reaching rates of 48 percent or higher. “While the president announced a new 20 percent added tariff on Vietnamese-made products, many children’s shoes from Vietnam already have a 20 percent tariff,” he wrote. “This raises the important question ahead of back-to-school shopping: Why should footwear companies and American families pay an additional 20 percent if they already pay 20 percent?”
Gorman said this could represent a significant stumbling block for brands. “There has not been clarity yet from the administration on stacking of MFN with these additional IEEPA duties, but for this industry, it matters a great deal,” she added.
Also murky are the new tariff rules surrounding transshipment. “Under current U.S. Customs law, transshipment is illegal. But because we have now seen it referenced, not only in the deal with Vietnam, but the letters going out to various countries, it suggests…that it’s questioning Rules of Origin,” Gorman said.
The trade expert said the inclusion of the transshipment clause appears on its face to be directed at regulating products or content that hail from China, which would underscore the president’s long-held motivations for rebalancing U.S. trade.
“We’re in something of uncharted territory here; in the past, Rules of Origin have been an incredibly complex set of negotiations undertaken as part of trade agreement discussions, and it’s one of the reasons that trade agreements in the past have taken so long, because there’s many interests,” Gorman said, noting that the rules vary significantly by industry, product category and even individual products.
But as time marches onward and the Aug. 1 start date for the new tariff regime approaches, there’s no information for either importers or Customs to determine what level of “transshipped” content might trigger the higher duty rates. And given lawmakers’ limited understanding of the global fashion supply chain, Gorman believes it’s “imperative” for the industry to advocate for itself with officials about “why supply chains look the way they do today.”
If the object of the transshipment clause is indeed to spur movement away from — and reduce dependence upon — China, they need to understand the magnitude of what it would mean to shift whole supply chains into other parts of the world, she believes. “If you’re going to move fabric, then you’re talking about mills and capital investment for mills. If you’re talking footwear, are we talking moving the molds that make the soles that are typically made in China?” she said. “That’s not something that you’re going to stand up overnight.”
Adding to the uncertainty of the moment is the fact that these policy changes have been imposed via executive action, as opposed to a longer-term, Congressionally driven trade policy revamp process. A new administration — or perhaps even the current one — could unravel these recent executive orders with the swipe of a pen, leaving companies to continue to wonder what the trade landscape will look like for months and years to come.
Some clarity is bound to come with more official notices from the White House and a Federal Register notice or official notification from Customs with more details, Gorman, who is now working to advise clients across industries and sectors on trade policy and supply chain strategy, said.
“My best advice is [to] stay the course — continue to diversify supply chains where possible,” she added, saying it’s “impossible to ride these tariff waves.”
“It’s simply too unpredictable, and so without more certainty: diversification where possible, dual sourcing for key items if possible. That’s good practice anyway, but it may prove to be valuable if we see significantly variable tariff rates across Southeast Asia, for example,” she said.