Give Me Your Pleather: How Tariff Disparities Subsidize Leather Goods
WASHINGTON (Feb. 28, 2022)—Observers of D.C. fashion may be shocked to find out that the most influential clothing designers aren’t in New York, but on Capitol Hill. And no, it’s not because pantsuits are back in style—it’s due to the numerous complications in the U.S. tariff code for apparel, footwear, and accessories.
While overall trade liberalization has brought many positives to the United States and the world, a number of tariff disparities currently exist that create numerous externalities and facilitate “tariff engineering,” where companies look to the tariff code when designing their products.
This is especially true in the fashion industry—the reason Converse have fuzzy soles and some blouses have odd pockets is entirely due to seemingly minor distinctions in the tariff code that lead to significantly lower tariff rates.
In a new policy short, R Street resident fellow Clark Packard examines similar examples of disparities and externalities in the leather apparel industry. For an administration mindful of climate impacts, the lower tariffs on leather products aren’t in line with reducing methane emissions. “Policymakers should lower tariffs on socially beneficial products such as leather substitutes,” says Packard. “They should be more mindful of potential social harms they may be unintentionally creating by establishing various tariff disparities.”
While not everyone is trying to emulate Ross Geller’s fashion with a pair of leather pants, it’s certainly a prominent material in many wardrobes. If you carry an imported leather bag to work, it likely entered the United States with a duty rate of 9 percent. However, if your bag is made of pleather, it entered under a different tariff line with a duty of 16 percent. If your work shoes, like loafers or pumps, are made of leather, they’re similarly a bargain for importers, with a rate of 8.5 percent. Change those shoes to another fabric? The rate spikes to 37.5 percent, which is quite the difference.
In an ideal world, these tariff disparities wouldn’t exist at all, but pleather lovers and climate change warriors should take note. While pleather pants may not be any easier to take on and off than the real deal, they certainly have more positive social externalities. In the case of apparel, footwear, and other industries where tariff engineering runs rampant, policymakers should take careful note of unintentional negative externalities and work to remove disparities in the tariff code.
Read the full study here.