Import Taxes Contribute to Unprecedented Number of Store Closures

A new Wall Street Journal report cites record-level retail bankruptcies and store closures for the first half of 2020, based on research from BDO USA. Import taxes (tariffs) contributed to these bankruptcies. 

Import taxes applied to shoes, clothing, and home furnishings are much higher than import taxes imposed on other goods. These taxes are hidden from buyers, since they are embedded in the sticker cost of sneakers, t-shirts, and other goods.

Figure 1: Import Taxes Penalize Shoe, Clothing, and Home Goods Retailers and Shoppers

Tariffs are also regressive taxes, meaning they are particularly burdensome for low-income Americans. For example, research from Jason Furman, Katheryn Russ, and Jay Shambaugh found that in general, “tariffs function as a regressive tax that weighs most heavily on women and single parents.” 

Many U.S. retailers have been hit hard by the COVID-19 pandemic and changes in Americans’ shopping habits. But they also operate in a high-tax environment that makes it difficult to succeed even in the best of times. 

Forcing Americans to pay more for necessities by maintaining high import taxes in the middle of a pandemic is unwise economic policy. Eliminating punitive tariffs would throw a much-needed lifeline to American retailers and families.