OCTOBER 21,
2019
USA Tariffs
With the
introduction of today's 25% tariff on the import of bespoke suits into the USA,
an increase from the previous 12%, the UK’s bespoke tailors have undoubtedly
been dragged into a wider, long-running trade dispute relating to the airline
industry.
Imposition
of this USA tariff comes at a particularly sensitive time. There’s a high
degree of uncertainty amongst all UK businesses in all sectors about the
short-term and long-term effects of Brexit, and now we have to contend with
these new imposed tariffs in the US, a traditionally strong and stable market
for British bespoke tailors.
Historically
the USA has been a very strong market for Savile Row tailors; everyone from
Presidents to Hollywood actors, musicians to businessmen have chosen to buy
British bespoke tailoring for its superior quality. Savile Row's bespoke
tailors have hosted trunk shows in US since half-way through the last century!
Curious
then that Trump hasn't imposed tariffs on French or Italian tailors. Unlike
previous Presidents, it may not come as a surprise to find out that Trump is
not dressed by Savile Row!
William
Skinner, Chairman of the Savile Row Bespoke Association and MD of Dege &
Skinner said: "Since the WTO ruling at the start of this month, we’ve had
a matter of days to prepare for what initially and unfortunately inevitably,
will have a negative impact on our US business, and our US-based customers.
The
imposition of a 25% price hike on bespoke suits is a significant amount of
money for any business to merely absorb overnight, without consequence.
We're in
discussion at government level to see how we can resolve this unfortunate
trading situation in the interests of our business and most importantly, our
long established, valued and loyal customer base in the US."
Savile Row
braces for US tariffs
BY GEORGE
ARNETT
8 OCTOBER
2019
Caught up
in a dispute over aviation subsidies, Savile Row tailors and Scottish knitwear
brands are staring down 25 per cent duties on £35 million worth of US exports.
Key
takeaways:
Savile Row
suit makers and Scottish woollen mills will face additional tariffs of 25 per
cent on their US exports from 18 October. The move is part of a dispute over
aviation subsidies between the US government and the EU.
The US is a
key export market for these firms, which are likely to raise prices.
Italian and
French fashion houses escaped sanction, leaving the UK textile industry
complaining of an unlevel playing field.
Savile Row
suits are about to get even more expensive for US shoppers.
Tailors and
Scottish knitwear firms were among those left reeling last week after the US
government announced that 25 per cent tariffs would soon be applied to a
significant portion of their product range upon export to the US.
The Trump
administration is attempting to recoup the $7.5 billion it won in a
15-year-long trade dispute with the EU over illegal subsidies to European
aviation firm Airbus through a series of punitive duty rises. Among the list of
British-exported clothing items affected include most types of men’s suits,
cashmere sweaters, women’s anoraks and pyjamas.
The measures
will affect £35 million in exports, per the UK Fashion and Textile Association
(UKFT). Around 23 per cent of exports from British luxury brands in 2017 headed
to the US, with a majority of firms seeing it as the primary market for future
growth, according to Walpole.
The tariffs
take effect at a particularly bad time for UK firms, which are still grappling
with the possibility of a no-deal exit from the EU later this month. UK
manufacturing activity in August fell to its lowest levels since 2012. The British
Fashion Council recently calculated that a no-deal Brexit could cost the
fashion industry nearly £1 billion per year in lost revenue.
Savile Row
will be particularly badly squeezed by the new tariffs, as the US is its most
important export market. Wall Street bankers have long had a taste for
British-made bespoke suits, which retail for between £2,500 and £30,000.
“We’re
better known in New York than we are in Newcastle, so we’ve always had a very
strong American presence,” says Sean Dixon, co-founder of Savile Row tailor
Richard James. The company opened its first store in the US at the end of last
year and has plans to expand further in the country.
Although
Richard James plans to absorb the costs where it can, the scale of the tariff
increases means that some prices hikes are inevitable. “There’s not much we can
do. We’ve just got to work out what we can do to mitigate it as best as possible
without damaging the business,” Dixon says.
Many of
Savile Row’s occupants have been in business for decades if not centuries, but
they are hardly invulnerable. Hardy Amies, founded in 1946, went bust earlier
this year. James Sleater is the founder of the youngest brand on Savile Row,
Cad and the Dandy. He says it took three and a half years to find a space on
the central London stretch before his brand opened in 2008, but now several
empty storefronts are available.
Sleater
also opened a store in the US last year as a “hedge against Brexit”. Sleater
now expects that many Savile Row firms will have to encourage US businessmen to
come to London to get their suits made and develop a greater presence in
markets like China and Russia.
Why them?
Come 18
October, Scotch whisky and European cheeses will also face duty increases. Not
all of the items on the list drawn up by the US Trade Representative (USTR) are
particularly lucrative, but many of them are headline-grabbing. Taking aim at
such iconic products gains outsize media impact.
“The
selected products reflect a variety of considerations, many of which were
raised through the notice and comment process, including the potential impact
on the US economy,” a spokesperson for the USTR writes by email. “USTR also
considered the likelihood that tariffs on certain products would be most likely
to encourage the EU finally to abandon its harmful WTO-inconsistent subsidies
for Airbus.”
Many in the
British fashion industry think the tariffs have targeted them unfairly. Italian
and French tailors and cashmere manufacturers will not face similar 25 per cent
duty increases.
“The UK is
the only country facing tariffs on our fashion and textile exports so if these
tariffs do come in, our companies will be at a massive disadvantage to our
European competitors,” Adam Mansell, CEO of UKFT, writes via email.
One company
that has withstood several trade disputes between the US and Britain is
Johnstons of Elgin, a Scottish woollen mill founded in 1797. The US is the
third-biggest export market for the company, and the new duties are likely to
apply to around half of the products it sells there. Aware of the potential ramifications
of the US government move, the US country manager for the firm made
representations to Congress before the tariffs were announced.
Simon
Cotton, CEO of Johnstons, says the majority of the products it is sending to
the US this year have already been shipped and that the company will fulfil any
orders currently made at the price they were sold. Given the ongoing
negotiations, that may buy Johnstons a bit more wiggle room than other less
prepared companies. Its US business has expanded by 40 per cent in the last
year, and Johnstons has no plans to pull back its investment just yet.
“We’re
waiting to see what happens because these things can get delayed or cancelled,”
Cotton says.
Indeed, the
UK government is hoping to resolve this dispute quickly. A spokesperson from
the Department for International Trade wrote: “Resorting to tariffs is not in
the interests of the UK, EU or US. The UK is working closely with the US, EU
and European partners to support a negotiated settlement to the Airbus and
Boeing disputes.”
But for the
firms affected, the tariffs are another big unknown to contend with because of
geopolitical tensions that lie beyond their control. “We’re being punished for
a big old war about aeroplanes,” says Helen Brocklebank, CEO of Walpole. “I
don’t think brands that put so much into the country should have to deal with
that.”
‘Absolutely
draconian’: British brands brace for Trump’s tariffs
UK expected
to be hit hardest by Trump’s latest tariffs after the 25% tax on $7.5bn of
goods is set to start against the EU
Edward
Helmore in New York
Fri 11 Oct
2019 06.00 BSTLast modified on Thu 17 Oct 2019 13.23 BST
There is a
corner of Manhattan’s Greenwich Avenue that is forever England – and right now
it’s bloody angry.
“This is
absolutely draconian, ridiculous,” huffed Sean Kavanagh-Dowsett, co-owner of
the restaurant, Tea & Sympathy, the adjoining general products store and
its neighbor, A Salt & Battery, a fish and chip shop, that has been serving
all things British to locals and expats for 29 years.
Behind a store
front of Union Jack flags, a red phone box and other symbols of Britishness,
Kavanagh-Dowsett is bracing for the impact of a 25% tariff on $7.5bn of EU
goods that is set to start on 18 October , the latest salvo in the Trump
administration’s trade war with the European Union.
Kavanagh-Dowsett
went through the products that would be hit, including Jammie Dodgers, Scottish
shortbread, clotted cream and Irish bacon. “It’s going to impact us, and as
always it’s going to get passed on to customers.”
The latest
tariffs follow a World Trade Organization (WTO) ruling that the European Union
unfairly subsidized the aerospace giant Airbus but it is just the latest in a
seemingly neverending spat over tariffs that started even before Donald Trump’s
election.
Kavanagh-Dowsett
had few kind words for Trump.
“I think
because he lives in this rarified world where he’s never had to think about the
cost of anything, because he doesn’t pay his bills, he’s detached from reality
and doesn’t really understand the cost of anything,” he said.
The UK is
the country expected to be hardest hit by Trump’s latest tariffs, even though
the UK is still in the midst of a messy and protracted exit from the European
Union. And it’s not just scones and cream that will be affected.
Among those
speaking out against the tariffs have been textile and clothing makers, who
face the raised duties on wool and cashmere.
The trade
group Walpole, which represents more than 250 luxury British brands including
Alexander McQueen, Burberry and Tanqueray gin, voiced “deep frustration” at
Trump administration’s tariffs on goods including whisky, liqueur and wine;
cashmere; bed linen and men and women’s clothing.
“It is of
particular concern that these tariffs come at a time when there is already so
much political and economic uncertainty,” said a spokesperson, noting that 24%
of British luxury goods are destined for North America and that a majority of
firms see it as the primary market for future growth.
According
to the group, two-thirds of its members name the US as their priority export
market.
“To
penalize businesses that are in significant expansion phases, looking for new
routes into the US and creating products American consumers desire – Johnston’s
of Elgin cashmere, Peter Reed bed linen, Savile Row suits, English wine and
numerous Scotch whiskies – will likely impact consumer choice as well as
business growth.
Overall,
the British luxury sector, which employs 160,000 workers, is bracing for new
pressure from the tariffs on top of a projected loss of £6.8bn in revenue in
the event of no-deal Brexit.
The fashion
and textile sector, itself anticipating a £1bn-a-year loss in revenue from a
no-deal Brexit, will see exports worth £35m affected by the tariffs, according
to the UK Fashion and Textile Association (UKFT).
Savile
Row’s tailors, a favorite of Wall Street bankers with several outposts in
Manhattan, are expected to be especially badly hit, in part because French and
Italian competitors are not affected by the additional levies. If UK
manufacturers were hoping the US would provide a hedge against Brexit, the
opposite is now true.
London’s
Savile Row tailors are expected to be hit hard by Trump’s latest tariffs
The
Department for International Trade in London, which is requesting an exception
on British goods arguing that the Airbus trade infringements were not related
to UK manufacturing, said in a statement:
“Resorting
to tariffs is not in the interests of the UK, EU or US. The UK is working
closely with the US, EU and European partners to support a negotiated
settlement to the Airbus and Boeing disputes,” said a spokesman.
Another of
the industries likely to feel the hit is the cashmere industry. The US imported
$362m worth of cashmere sweaters last year. Bruce Gifford of the e-commerce
brand Naked Cashmere told Women’s Wear Daily the cost of the tariffs would
almost certainly be passed on to the consumer.
“I think anybody
that in the long run says that they’re not going to be raising prices is just
lying to you. You have to make a certain amount of money to stay in business,”
he told trade paper Women’s Wear Daily.
But the US
trade representative, Robert Lighthizer, has defended the measures, accusing
Europe of “providing massive subsidies to Airbus that have seriously injured
the US aerospace industry and our workers”.
Now the row
looks certain to escalate. The European commissioner for trade, Cecilia
Malmström, warned the US countermeasures would be push “the EU into a situation
where we will have no other option than to do the same”.
According
to Ana Boata, European economist at trade credit insurer Euler Hermes, the
countries hardest hit by US tariffs will be the UK, with annual losses of
$1.4bn, followed by France, Germany, Spain and Ireland.
“We
estimate the new sanctions will result in an $8.6bn annual export loss for the
EU,” she wrote in a report. And Boata predicts the Europeans are unlikely to
accept the tariffs passively. “We expect Brussels to retaliate with duties on
up $20bn of goods and a decision from the WTO is expected next March,” she
added.
Back at Tea
& Sympathy, Kavanagh-Dowsett reeled off his favorite British brands that
will be affected, including the shoemakers Grenson and John Lobb. Two years
ago, the store initiated a PR war with Hershey’s after the confectioner
insisted they sell US versions of its most popular UK chocolate bars.
In that
instance, Kavanagh-Dowsett said, the chocolate maker backed down after
receiving an avalanche of bad publicity. He said the store was gearing up for
another campaign. “We’re British for a living at this stage. Just the hike in
chocolate is going to impact so many people,” he said.
• This
article was amended on 17 October 2019 because an earlier version referred to a
25% tariff on $7.5bn of UK goods, when EU goods was meant. This has been
corrected.
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