In the ongoing debate over international trade, tariffs are often a contentious topic. Some argue that tariffs protect domestic industries and create jobs, while others contend that they harm consumers and stifle economic growth. The reality, as is often the case, is more nuanced. To understand how tariffs can impact an industry, here is a closer look at the apparel industry as an example.

The global apparel industry

The apparel industry is a truly global one, with clothing and textiles produced and traded all over the world.

Table: Global apparel exports and imports

Source: World Trade Organization

The table clearly shows China is the world's largest exporter of apparel, while the US is the largest importer. This means that American consumers rely heavily on imported clothing. EU interestingly is in second position both as exporter and importer.

Tariffs impact on industry

Tariffs on imported apparel can have a number of effects, both positive and negative. On the positive side, in helps in protection of domestic jobs as tariffs can make imported clothing more expensive, potentially leading consumers to purchase domestically-produced clothing instead. This could help to protect jobs in the apparel industry. Domestic production too gets a boost as demand for locally-produced clothing increases, apparel manufacturers may ramp up production, potentially leading to the creation of new jobs. And by making imported clothing more expensive, tariffs could encourage consumers to reduce their reliance on imports, which could have positive effects on the trade balance.

However, on the down side, tariffs make imported clothing more expensive, which means consumers have to pay more for the same products. This can be particularly harmful to low-income households. It could also lead to retaliation from trading partners. When one country imposes tariffs on imports, other countries may retaliate with their own tariffs. This can lead to a trade war, which can harm businesses and consumers in all countries involved. And also tariffs on apparel can lead to job losses in related industries, such as retail and transportation.

Do tariffs actually help?

As the article ‘How Tariffs Can Help America’ points out, the effectiveness of tariffs depends on the specific circumstances under which they are implemented. In the case of the apparel industry, tariffs may provide some benefits in terms of protecting domestic jobs and increasing domestic production. However, these benefits are likely to be outweighed by the drawbacks, such as higher prices for consumers and the potential for retaliation from trading partners.

Therefore, tariffs are a complex policy tool with the potential for both positive and negative effects. While they may provide some benefits to specific industries, they can also harm consumers and lead to trade wars. In the case of the apparel industry, the evidence suggests that the drawbacks of tariffs are likely to outweigh the benefits.

It is important to carefully consider all of the potential impacts of tariffs before implementing them. In many cases, there may be more effective ways to support domestic industries and create jobs.