Italian and Spanish footwear risk additional taxes in the US market

What is on the table?  

In a nutshell, back in June 2020, the United States Trade Representative (USTR) initiated investigations into 10 jurisdictions (territories), under the Trump Administration. In question were the digital service taxes (DSTs) adopted or under consideration in each territory. Back in January, the agency concluded that DSTs in the United Kingdom, Austria, Spain, Italy, India, and Turkey were subject to action under Section 301 of the Trade Act of 1974 for “placing such burdens on US companies”.

Now, the USTR is collecting public comments on the potential implementation of tariffs to a list of goods from 6 US trading partners, and the threat is real as tariffs can go up to 25%. Footwear is on the list of products that could be taxed for Spain, Italy and the UK.

The impact for footwear: Italy, Spain and UK

When we look into the data for US imports, in 2019, US imports of footwear from Italy reached 1.573 billion euros, of which 17.7% fall under the lines now proposed under Section 301 to be charged with the additional tariff. For the UK, that percentage goes up to 55.2% of all British footwear entering the US. The more dramatic situation, if these end up going ahead, is Spain: out of the 220 million US dollars’ worth of footwear which entered the US in 2019, 89.8% of it is actually under the lines now considered for Spain within the Section 301 procedure. Although in terms of percentage weight the measures seem to be heavier for Spain, given the overall value of imported footwear from Italy, the impact might reach 278 million US dollars for this country (compares to 198 million US dollars in Spain).

What is the worst-case scenario?

The worst-case scenario might mean that footwear under the lines chosen for each of the three countries (more information about the lines HERE) is charged with an additional 25% tax.  If we look at the 2019 imports, that will mean that 493 million US dollars’ worth of footwear coming from either Italy, Spain or the UK will be charged with a 25% tax when entering the US market. This can potentially result in additional tax of 123 million US dollars. Additional taxes will result in a lack of competitivity of these products in the US market as their cost will increase by a quarter. Spain, with almost 90% of its footwear exports into the US impacted, has a lot to lose and is rightfully concerned.

What is the position of the US footwear industry?
As we published yesterday, the FDRA - Footwear Distributors & Retailers of America is 100% against the duties.