From NAFTA to Protectionism, what might Trump’s trade policy’s impact on the American fashion and beauty industries be?
Issues with Trump’s Trade Policy in Regards to the Fashion Industry:
Government, Economy, Trade and Fashion:
Currently, we as a capitalistic country do not enforce protectionism; government lets business do what it pleases, this is called “laissez-fairee,” or hands off…it’s supposed to be that way with government and religion as well, with the long gone separation of church and state (abortion, Women’s and LGBTQ rights). Protectionism seems like a good idea to Trump because it would seemingly give people reason to buy and produce in America, decreasing the amount of imports and increasing jobs, but obviously drastically increasing the price and cost to produce the same goods; however, we know that competition and free trade are what drive price down. Imports and exports are also an integral part of the fashion industry.
Fashion is dependent on different countries:
We literally cannot produce all fashion in America: We Don’t Have the Factories or Machinery to Produce Quality Textiles:
Fashion is a global industry for a reason- the US no longer has the ability to produce quality textiles, something the Olsen twins shed light on when they could not source American fabric for their clothing lines, including the Row, but were rather forced to seek out Italian mills. The clothing line I worked for sourced Pima cotton from and outsourced its production to Peru- other countries are resources for different crops, specialized labor and processes (dying, tanning, couture), or resources.
Beyond not being able to produce, period, we are reliant upon other countries for their cheap and or specialized labor, and sourcing of raw materials and fabrics, which would now cost more to import, driving up cost and having a ripple effect throughout the industry.
Cost and Price Would Go Up, Fast Fashion Companies Would Struggle
Without this global network, companies that bring cheap fast fashion, such as H&M and Forever 21, can no longer deliver at the same price point. When you decide to produce, sell, or buy American, it forces the cost and thus the price up. Americans are not necessarily in the position to be forced to spend more for everything, particularly when the retail industry has been hurting since 2008.
Trump believes that protectionism will create jobs, but it would have the converse effect as companies would still produce outside the US (motivated by cheap labor, factories, textiles as explained above) and be forced to fire employees as companies have exhausted their ability to source elsewhere to reduce cost, and have already been forced to lay off employees amidst “increasing price and demand volatility.” Trump’s trade policy would only exacerbate the situation. Uniqlo made the statement it would be forced to pull out of the US market if Trump’s policies are enacted, just as Bebe and Payless (bankrupt) announcing the closing of stores (Cosmopolitan.com).
Certain markets have been enjoying consumers shifting up and down:
A affordable luxury players benefited from consumers trading down from luxury, particularly amongst Chinese consumers. In North America especially, the affordable luxury segment’s growth was driven by new players operating with the positioning of designer quality at affordable prices.
The value segment also continued to grow in 2016, particularly as a consequence of large global players expanding geographically.
According to The McKinsey Report, also titled The State of Fashion 2017, 75% of all purchases were of sale items. Price and demand are said to be volatile, with “exchange rate fluctuations and labor costs” being among concerns, and with the protectionist tariffs and American-made proposal adding to the cost to produce goods, retail will likely be hit hard and we’ll see companies fold.
Upsetting The Fashion Cycle
The fashion cycle, the time it takes for a trend or style to pick up momentum, become produced on a mass scale after trickling down through the market, and go out of style, is something that was revolutionized in recent years largely thanks to Zara and Inditex. It has gone from six months to under two weeks, and has drastically changed the fashion industry. Companies now respond to trends almost immediately, allowing for less investment in inventory that won’t sell.
According to The Washington Post‘s Max Ehrenfreund, in “What those papers Trump left on His Desk Reveal About His Trade Policy,” Trump is not living up to his promises.
The letter on NAFTA, dated March 22 and first reported by the Wall Street Journal, was a draft…Trump has pledged to revise the accord, signed by President Clinton, or to withdraw if Mexico and Canada will not agree to make changes.
Yet apart from passages calling for limiting federal procurement to U.S. firms and restricting the amount of parts and raw materials from outside North America that can be traded among the three countries at NAFTA’s preferential rates, the draft of the letter only endorsed minor changes to the agreement.
…Commerce Secretary Wilbur… had announced a set of new retaliatory duties on steel plate from Austria, Belgium, France, Germany, Italy, Japan, Korea and Taiwan. The duties follow a finding by the Commerce Department that those countries had engaged in unfair practices, allowing U.S. customs officials to begin collecting taxes on that steel pending a final determination expected in May.
…Trump’s actions so far “reflect for the most part a fairly conventional approach,” said John Veroneau, a former deputy U.S. trade representative…There was a hint of more protectionist policy in Trump’s actions later Friday with respect to retaliation and other aspects of international trade.
One of Trump’s actions orders a review of whether those retaliatory duties are being adequately collected. A second will instruct the administration to examine whether unfair policies are contributing to the U.S. trade deficit with specific countries.
…“While it is important to examine the causes of our trade deficits, we know that there are many causes that have nothing to do with trade agreements — including the status of the U.S. dollar as the world’s reserve currency and the widespread use of the U.S. dollar internationally,” said Rep. Kevin Brady.
While the lessons we were taught on certain things in history and econ, particularly on free-trade, laissez-fairee, etc., are being called into question by the Trump administration and protectionists, there was always a part of me that wondered about protectionism and the effect it would have on our economy. I do believe that it would be more of a long-term than short-term goal to get America back to being a country that produces textiles and clothing competitively. However, we simply cannot get there overnight, and imposing trade policies at this state would, in my opinion, negatively impact the industry and our economy- from production and consumerism standpoints.
The effect on the beauty industry would be similar in that tariffs would affect both high end and mainstream cosmetic brands.
Whether you purchase high end makeup imported from France, or drugstore brands manufactured in China, you can expect a price increase in both brands forced to make American and those which will be imported, but most noticeably “drug-store” brands because of the importance of price-point to consumers in that market segment. Therefore, cosmetics would cost more to those Trump’s policies are supposed to appeal to- and if they are not given more jobs and disposable income with this protectionist shift, it could seem like inflation if products cost more but they’re in the same financial situation.
What are your thoughts about proposed changes, protectionism, tariffs? Comment below, and don’t forget to subscribe!