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Paul Charron, chairman and chief executive officer of Liz Claiborne Inc., said at the firm's annual meeting Thursday that he had heard speculation that China would raise its export tariffs, and noted the recent quota calls.
"All these possibilities have been incorporated into our allocation plans for the balance of this year," Charron said. "Importantly, our sourcing configuration offers us significant flexibility to continue to effectively source product during this uncertain time."
Tariffs are also a revenue stream for the Chinese government and a way of nudging its textile and apparel manufacturing base toward more expensive goods, as per-item tariffs have a greater impact on low-cost products.
"[China] would like to do something to ease tension, it's not interested in sort of sniping back and forth with the U.S.," said Andrew Bernard, professor of international economics at the Tuck School of Business at Dartmouth. "China wants to appear sensitive to the concerns of the U.S. constituencies, but it's not going to play necessarily by U.S. rules. This is the obvious place for it to try to signal that it's not insensitive."
Looming larger for China than textiles is the issue of its currency, the yuan, which U.S. lawmakers and manufacturers maintain is undervalued, lowering the price of exports by as much as 40 percent and giving the country an unfair trade advantage.
The yuan has been pegged to the dollar at a rate of 8.28 to one for the last decade, and the Treasury Department last week turned up the heat on China for reforms. China had a trade surplus with the U.S. of $162 million last year.
If China doesn't move to further reform its monetary polices, Treasury Secretary John Snow said the country could be labeled a manipulator of its currency, which would lead to WTO involvement and ultimately economic sanctions.
Dan Griswold, director of the center for trade policy studies at the Cato Institute, a libertarian think tank, said the tariff rise was "a move to diffuse protectionist pressures in the U.S.," but one that might not succeed.
"It's a-lesser-of-evils gesture," he said. "It's bad economics, and I don't expect it will prove to be any better of a political move. Why shouldn't purchasers of apparel and related products be able to enjoy global prices and global competition?"