Worker impacts from a small business that has paid $100,000 in tariffs: “GSP impact has been severe this year. Had to lay off 1 person and did not hire for a new sales position.”

Covid/worker impacts from a small business that has paid $350,000 in tariffs: “Covid19 shutdown reduced our cashflow, with GSP [expired] we don’t have the extra funds to order inventory we need. We were looking to hire at least 3 new employees. Now on hold due to GSP.”

China/worker impacts from a small business that has paid $40,000 in tariffs: “We rely heavily on Thailand produced goods in our market to compete with China imports from our competition. We are higher priced even without 10% tariffs. Now we have a real threat to our market share with cost increase on goods of 10%…Possible funds normally used for employee raised wages will be paid in new tariffs. This weakens our work force stability, thus threatening our output capacity.”

U.S. manufacturing impact from a business that has paid $15,000 in tariffs (but estimates $350,000 in tariffs if GSP remains expired all year): “We are selling our aluminum products to a leading US HVAC manufacture and those products are excluded from 232 tariff but we still have to pay the standard duty without GSP.”

In summary, GSP expiration reduces American jobs, makes pay/benefits at existing jobs worse, makes China more competitive, and raises costs for American manufacturers (even for products not available in the United States). Expiration impacts snowball over time, so Congress should renew GSP – and refund tariffs paid – as soon as possible.

If you’re a company impacted by GSP expiration, please answer our very short survey on GSP expiration impacts to date (the source for all of the above examples). To further help the Coalition for GSP educate policymakers on who is hurt by expiration (and how), companies are strongly encouraged to:

• write their lawmakers about GSP renewal with our Contact Congress tool
• join the Coalition for GSP
• add their name to the free GSP supporter list

Dear Legislators,                                                                                                           

My name is Nina Cooper and my company, Nina Designs, has been working to improve the lives of women in Indonesia and Thailand for over 30 years by providing secure jobs with benefits, fair wages and equal opportunity for advancement. Our company produces silver jewelry and jewelry making supplies.

https://www.ninadesigns.com/about-us/fair-trade

The GSP is a key factor in our ability to grow our company over the years and provide opportunities for women to thrive.  As you will see, their jobs in silver production have become a lifeline for extended families during the pandemic. Below you will find biographical details of three women who work at our production facility in Bali so that you can see how the impact of the GSP plays out over time.

Our Nina Designs community includes not only the wonderful artisans who craft our products but over 1,000 women jewelry designers in the USA who incorporate our silver charms and findings into their own jewelry. Most of these women work from their homes while raising children and homeschooling them during the pandemic. We also have 12 women working in California to keep our company running smoothly. They design and distribute our beautiful silver products. Finally, we have supported women artisans internationally through our microloan program which has lent over $200,000 to over 700 women in 30 countries. This complex and hard earned ecosystem of mutual support is in jeopardy unless you vote to renew the GSP.

I entreat Congress to reinstate the GSP so that my company can continue empowering women around the world.

“After graduating high school, I started work at Jani Silver 24 years ago as a silver smith because I loved the world of Fashion, especially jewelry. After work, in my free time, I used to teach myself English and computer. One day I asked my boss, Ibu Janet, if I could change to a position in the office. She explained that as I was such a productive smith, I would earn more doing that than data entry. I explained that I felt one day I could reach a senior management position if I was given the opportunity and then I would earn more. She laughed because I was so enthusiastic. I felt that I could combine my silversmithing knowledge with good management systems and when that proved to be true, I was so happy!

My husband, parents and my children all support me and my work. My salary supports not only my own family, but also my extended family.  Since I started here, I married and had 2 children. I was extremely lucky that our company has a policy of 3 months paid maternity leave, or 6 months leave on 50% salary. During the Covid Pandemic, each staff member has received food assistance. I share mine with people in my village who don’t have any income now. I am very grateful that I was given opportunities to advance in my career.  For several years I was a Materials / Logistics Planner and then Production Planner. Now I am the General Manager!  This was beyond my wildest dreams when I started as a silver smith.”

“I have really loved working here for the past 19 years. The owner and management team are good people who really care about the staff.  The income from my silver-smithing work is a huge help for all my family, including my parents in law, especially now that my husband lost his tourism related job.

We borrowed money (at 24% p/a) to build workers housing but now most people don’t have a job so they cannot afford to rent and just stay with their family in their village. So we also opened a small kiosk at the front of our house selling coffee, noodles, and farming supplies like chicken feed etc.

On my salary we can still eat well (but not as much meat as before) and educate our two children. Without my job, my family would be in a very difficult situation. The company pays the BPJS health insurance premiums that covers my whole family’s medical expenses. It also paid me twice for 3 months maternity leave.”

“I have worked here since I left school 22 years ago. I’ve always felt a strong sense of family both between me and my work mates and even between the management. Perhaps the most important thing is that with my salary, I am able to cover the living costs of my family, including my parents and pay for my two children’s schooling.  My husband used to work in tourism but since the Covid pandemic began he has had no work. I am very grateful for my job.”

GSP eliminates hundreds of thousands of dollars in tariffs annually on Cannon’s imports from Myanmar and Sri Lanka. The savings are passed along to Cannon’s customers, while helping those GSP countries “compete with giants like China.”

Watch CEO Frank Cannon explain how why its so important for Congress to renew GSP this year.

If you’re a GSP importer, submit your own video testimonial here.

GSP eliminates $25,000 to $30,000 in tariffs annually on panels designed in the United States and manufactured in Thailand. The savings help Vtronix keep costs low for its customers — SME American manufacturers — who in turn are better able to compete against large, multinational producers.

Watch founder Anil Gowda explain how “this year, especially with Covid…renewing GSP would be a great benefit for us.”

If you’re a GSP importer, submit your own video testimonial here.

Cell cast acrylic is the raw material used to create the barriers in almost every public space, where one person must interact with another, throughout the entire United States. Cell cast acrylic production in the United States is limited. Imposing duties on products that do not threaten U.S. manufacturing and in fact, create thousands of fabrication and installation jobs, would have resulted in high COVID barrier costs which would have siphoned funds from the purchase of all types of PPE’s during this pandemic.

Put differently: the materials for the plastic barriers now installed everywhere aren’t available from U.S. sources, and GSP helps keep costs low so money can be better spent on other protective measures.

The acrylics example is important for two reasons: 1) everyone has seen the new plastic barriers even if they don’t know what they’re made from, and 2) they would never be classified as a “medical product” in the traditional sense of “what’s needed to battle Covid-19?” For example, they are nowhere to be found in the USITC’s recent report COVID-19 Related Goods: U.S. Imports and Tariffs.

The trade data shows demand for cell cast acrylics has surged in recent months. Compared to 2019, GSP imports were up about 80% in May 2020, 130% in June, and nearly 200% in July. Non-GSP imports were flat in May, up 50% in June and up 100% in July – still strong but clearly showing the important role of GSP benefits in meeting this new demand.

Importers of similar products, such as rubber gloves, have reported similar expectations. One importer of non-medical gloves said current demand for rubber gloves is at least twice – and perhaps as much as nine times – global manufacturing capacity. While lost GSP won’t reduce demand, it could mean up to $10 million annually in extra taxes on rubber gloves alone.

Face masks from Thailand, which lost GSP in April, are the flip side of the coin. Lost GSP won’t reduce Covid-driven demand, but it will raise costs for Americans responding to the pandemic. Congressional failure to renew GSP would add acrylic barriers, rubber gloves, and many other to the list of Covid-related products made “more expensive than necessary” due to tariffs.

Given the strong bipartisan support for GSP (here, or more recently here), hopefully Congress will act soon to avoid this and many other painful tariff hikes for American companies, workers, and consumers.

Our first video comes from Xpres LLC in Winston-Salem, North Carolina. After tripling employment from 25 to 75 workers since 2015, Xpres has been forced to downsize this year due to Covid-19. Not only did Xpres shut down for 3 weeks, many of its customers around the country did too. In the words of CEO Jan Reid, it’d be “double trouble” if GSP expires and its raw material imports from Thailand face 10% tariffs starting January 1.

Watch the full clip below. If you’re a GSP importer, submit your own video testimonial here.

In July alone, American companies paid over $275,000 on non-disposable cloth face masks from Thailand – and about $25,000 on other types of face masks – that face 7% tariffs without GSP. The next highest tariff line, certain off-road tires, faced a little over $200,000 in new tariffs due to lost GSP.

Such analysis was not possible until recent changes to how the United States reports import data for certain health-related products. Historically cloth face masks were reported in a catch-all “other made-up [textile] articles” category (HTS 6307.90.9889), but that catch-all category was subdivided into the following categories starting July 1:

• N95 Respirators Of Textiles (HTS 6307.90.9845)
• Respirators Of Textiles, Other Than N95 (HTS 6307.90.9850)
• Face Masks Of Textiles, Disposable (HTS 6307.90.9870)
• Face Masks Of Textiles, Other Than Disposable (HTS 6307.90.9875)
• Other Made Up Textile Articles (HTS 6307.90.9891)

Data show the old catch-all category of imports faced nearly $800,000 in tariffs in May/June – about 80% more than the next highest tariff line. And while we cannot know exactly how much of those tariffs were on masks, the July breakdown suggests it is a large majority.

Import trends clearly show tariffs from suspended GSP are hurting Americans, not Thais. While Americans are paying hundreds of thousands of dollars per month in extra tariffs, Thai exporters are shipping more than ever due to surging demand from Covid-19. It’s a lose-lose scenario for everyday Americans and for those that want to use punitive tariffs as leverage.

While the specific tariff costs for Thai masks couldn’t be known until recently, the potential costs were obvious before the GSP suspension took effect. In mid-April, 17 national associations asked the Trump Administration to delay implementation of the GSP suspension. The letter warned that the move “could undermine COVID-19 response directly” and “the United States should not reduce sourcing options or raise costs for potentially important products.”

Recognizing that higher tariffs for face masks would hurt Americans, the Trump administration suspended Section 301 China tariffs on these products in March. The Administration similarly could reinstate GSP benefits for Thailand, or it could continue harming Americans by imposing punitive tariffs on needed items.

The top states by GSP savings have been fairly consistent over the years. California accounts for more than a quarter of GSP savings – about as much as the next 4 states (Florida, New York, Texas, New Jersey) combined. Washington and Tennessee have moved into the top 10 states in 2020, replacing Pennsylvania and North Carolina.

Savings are down sharply, from $555 million in 2019 to $407 million in 2020. The map below shows the widespread declines, with the Mountain West being a notable exception. Washington, Idaho, Wyoming, Utah, Colorado, and Arizona form a string of growth states from the Canadian to Mexican borders. Colorado’s savings increased over 150% from 2019, largely driven by a jump in backpack imports. Massachusetts is the only other state where GSP savings are up in the first half of 2020.

Savings declined by over 40% in more than 20 states, including a whopping 78% in Vermont. GSP savings also declined by 67% in Montana and Oklahoma, 63% in North Dakota, 61% in Michigan, 60% in Minnesota, and 52% in West Virginia.

Declines are NOT due to Covid-19. American companies have paid up to $183 million in extra tariffs in 2020 due to GSP suspensions for India, Turkey, and Thailand. In the first half of 2019, tariffs paid due to suspensions (India and Turkey only) were about $35 million. Add those potential savings to actual savings in both years, and the first half totals were nearly identical ($590 million) in spite of Covid-19-related declines. Our next post will dig into state-by-state costs in 2020 associated with the suspensions.

The estimate is based on an analysis of GSP imports and tariff savings for products flagged in the USITC’s recent report COVID-19 Related Goods: U.S. Imports and Tariffs, which was requested by House Ways and Means Chairman Richard Neal and Senate Finance Committee Chairman Chuck Grassley. This is a narrow definition that likely discounts savings on a wide range of indirectly-related products, as made clear by responses to the Coalition for GSP’s Covid-19 survey (take the survey here, see results to date here).

Tim Smith, President of HIBLOW USA in Saline, Michigan, reported “98% of the air pumps we sell to American OEM’s for medical devices come from the Philippines.” Specific medical applications for HIBLOW’s pumps include respiratory devices, bariatric air mattresses, and immunity/ blood examination equipment. GSP eliminated several million in tariffs on air pumps in 2019, but the pumps themselves are not considered medical products in the USITC report.

Another respondent expects increases in their imports of acrylic plastics from Indonesia and Thailand in 2020. The plastics are used to make sneeze guards for supermarkets and retail locations, which are in high demand due to Covid-19. But again, acrylics are not really “medical” products and do not appear on the USITC list. GSP eliminated several million in tariffs on acrylic plastics in 2019.

The Covid-related product list also shows the harm from seemingly unrelated GSP decisions by the Administration.

GSP would have eliminated $31 million in tariffs in 2019 on the Covid-19 products if the Administration had not terminated eligibility for India and Turkey. Due to the decisions, American companies paid those $7 million in tariffs.

More recently, the Administration suspended GSP benefits for about 1/3 of imports from Thailand, including products on the USITC list such as safety goggles and textile articles. The decision went ahead despite warnings that the suspension list contained products related to Covid-19 response.

That’s right: in the middle of a pandemic the Administration chose to impose new tariffs on products deemed necessary to fight the pandemic.

Looking only at products still eligible for GSP today (i.e., no savings for products from India, Turkey, or on the Thailand partial suspension list), GSP savings for Covid-19 related products in drops to $17 million. Obviously the Administration did not eliminate GSP benefits with the intent of adding $14 million in tariffs annually to Covid-19 related products, but that is the practical impact of their actions.

If Congress wants to promote a cost-effective response to Covid-19, it should immediately extend GSP’s authorization and push to restore benefits that have been lost over the last year.