Holiday sales in the U.S. are expected to be $655.8 billion during November and December 2016, according to National Federal Retail forecasts, a 3.6% increase from 2015. Approximately 30% of holiday sales are imported products, ranging from 96% in footwear, 94% in computer products, 92% in apparel and textiles, 86% in communications products to 65% in toys.
Approximately half of all non-agricultural goods entering the United States are duty free while the rest of imported goods aggregate to around 2% tariffs (trade-weighted average rate), calculated by the Office of the United States Trade Representative. Tariffs are customs duties that are levied either on a percentage of the product’s total value or on a specific basis per unit. The U.S. Harmonized Tariff Schedule contains 7,872 tariff lines.
Recent policy discussions of a border adjustment tax includes a tax on all imported products. Like any tax, consumers will bear the burden. A 5% import tax on imported products would raise imported product prices by 5%. To put a 5% import tax into context, consumers would have to pay an additional $3.40 tax for a $68 pair of sneakers imported from Vietnam or an additional $5 for a $100 child’s bicycle imported from China. For $1,000 holiday spending this year, 30% representing imported products, Americans would have to pay an additional $15 tax. In addition to consumers, imported taxes could negatively affect jobs and businesses throughout the entire supply chain from transportation to retail stores. Furthermore, an imported tax would trigger retaliations from U.S. trading partners, which will harm U.S. exports.
Nam Pham is Managing Partner at ndp | analytics.