Big news in the sewing world this past week is “the Jo-Ann’s petition” against tariffs on imported fabrics and yarns from China. Have you received it? Have you signed it? Are you going to, or not? I have mixed emotions about it and I’ll explain why. (Please click on blue underlined sections for references).
I was thinking about the tariffs petition yesterday while reading a Wall Street Journal book review: “What Adam Smith Knew About Trade Wars” (entitled https://www.wsj.com/articles/what-adam-smith-knew-about-trade-wars-1535036195). You may remember learning in high school civics class about Smith’s “The Wealth of Nations” (free trade plus division of labor creates a better standard of living for all). Turns out Smith also believed that competition creates economic value and keeps markets honest, and that governments sometimes have to level the playing field….hence the need for tariffs. And the U.S. imposed a quite comprehensive import tariff on Chinese goods this summer….including fabrics and yarn.
Now, I love Jo-Ann Fabric stores. For those of you outside the U.S., Jo-Ann’s is a chain of 850 fabric (and craft supply) stores, all across America in every state except Hawaii. Even though the Jo-Ann’s within driving distance of my home is tiny and has an extremely limited selection, the sales staff and managers are sweet. I’m there every week and spend a somewhat ridiculous amount of money. Obviously a 25% price increase will affect me personally.
(I have nothing against China: I worked in China for years and loved it. Other than the air pollution. Funny that a clue in last week’s Wall Street Journal crossword was “blanket over Beijing” (answer: SMOG).)
In case you’ve been on vacation this week, news of the Jo-Ann’s petition has been printed in virtually every newspaper across the U.S.. If you are on Facebook in any sewing or pattern groups, you’ve probably read posts about it, and/or seen pop-ups sponsored by Jo-Anns:
And then there’s the email from CEO Jill Soltau, asking you to sign the petition and notify your elected representatives. Basically the petition argues that proposed tariffs on fabric and craft commodities will unintentionally create a tax on goods “Made in America”.
She has dubbed the proposal the “Made in America” tax, because in her reasoning, adding costs to materials purchased for hand-making in the U.S. will force makers to pass along the price increase, which is equivalent to taxing American-made crafts.
(Note: this is not to be confused with the House Ways and Means Committee “Made in America” tax lingo of 2017, which refers to the unbalanced corporate tax rates between the U.S. and other countries:
At this moment over 20,000 people have signed her petition. Should I be one of them? I much refer trade AGREEMENTS over trade TARIFFS…who doesn’t? I hesitate because I fell Ms. Soltau is being a bit disingenuous, and I’ll give you 10 reasons why:
The name she coined…the “Made in America” tax…is misleading. This is not a tax, it’s a tariff….an import duty. Big difference. And it’s not a tariff on American goods, it’s a tariff on NON-American goods. Some Facebook members have been asking how this tax will work, is this a new sales tax we have to collect from our customers, etc. That’s not surprising to me, coming off of the recent Supreme Court decision (South Dakota versus Wayfair) which portends to make sales tax collection from the over 10,000 different state sales tax venues across the country a nightmare…unless exclusions are made for small makers, or unless venues such as Etsy integrate sales tax collection as they have for certain states already. Otherwise the paperwork compliance will be a killer.
2. You cannot legally label something “Made in America” or “Made in USA” unless it is made of all, or mostly all, American-made components.The Federal Trade Commission allows you to have at most a negligible amount of foreign-made parts. I once read about a manufacturer of basketball hoops who made every effort to source components in the US, but was stuck importing a single bolt from overseas. They were stopped from labeling their product “Made in USA”. A competitor turned them in to the FTC.
So if you are in the U.S., sewing or knitting items using fabric or yarn from overseas, you cannot legally label it “Made in America”. You CAN label it “Made in USA of Imported Fabric” but I guess that doesn’t sound as catchy….the “Made in USA of Imported Fabric Tax“?
3. Naturally the CEO is focused on her own retail operation, however she doesn’t mention that the categories sold at Jo-Ann stores that would be affected are a tiny fraction of the complete list of import items subject to new tariffs.
It would be nice to see her concern over other businesses who import materials….not just the relatively small number of crafters (as compared to the general population). She is asking to eliminate a dozen categories out of thousands. It smacks a bit of “I only care about my business and my clients, not about the big picture.” And I understand, she doesn’t want to get into politics and offend anyone yet I’d like to see a balanced argument of the pros and cons for this legislation, and how it concerns the overall American economy. Specifically:
4. I would have liked to see an explanation of WHY these tariffs are being implemented. The reason for the tariffs is in response to business practices in China. This goes unmentioned in the petition.
Personally I think it is just as important that tariffs be set on Chinese goods that are made without the pollution controls used in the U.S. The fabric industry is a huge problem in this regard. Dyes and printing inks from fabric mills routinely get poured into the water system. Smoke and ashes from cheap coal waft out of factory chimneys.
I would also prefer a tariff on finished apparel, rather than on materials. The enormous volume of garments that are mass-produced-in-overseas-factories and get passed off as “handmade” in online shops (Etsy, Shopify, Big Cartel sites) is irritating. I see the exact same items over and over again, in shop after shop.
What would really make me happy would be an end to the preferential treatment China gets in U.S. shipping. I have to spend around $7.00 to send a small package across the U.S.; a seller from China gets a huge discount from the USPS, paid for by American taxpayers. Talk about unfair!
But those are issues for another day. The current discussion is about material imports, and a bit of explanation would have been welcome.
Heather and Diane sell Kitchen-Aid mixer covers for $25.00 in dozens of cute prints and a whole variety of solids to coordinate with any decor. Let’s say they require 1 yard of fabric at $8.00. (As with any handmade, the value is in the design and labor more than in the materials). With a 25% tariff the cost will be $10.00. Now Heather and Diane have a choice: increase their mixer cover by the $2.00 amount of the fabric increase, and charge $27.00? Take the $2.00 hit and sell at their regular retail of $25.00? Put the $2.00 into their standard markup calculation and maybe raise the price to $29.00?
Yes of course there is always a “tipping point” at which the customer says “I can’t afford that” but the customer who buys Heather and Diane’s handmade cover on Etsy is probably not the same as the person who buys the basic Kitchen-Aid cover at Walmart.
Other handmade items have a much larger price “spread”. Handmade children’s dresses are regularly priced at around $50, compared to factory-made at $19.99. Handmade quilts command $200 – $300, compared to factory-made imports at $29.99. Adding a couple of dollars to the price of handmade is not going to make all that much of a difference, considering that the value of handmade is in the workmanship, not the materials. Just as cutting the price by a few dollars is not going to get the budget customer interested.
6. Truth is that the U.S. has a very low tariff rate, as compared to other industrial nations:
It’s not as if we are the only ones protecting our own interests.
7. Considering the way Jo-Ann Stores manipulates prices, complaining about a wholesale price increase seems a bit silly. If Ms. Soltau really cared about giving customers the best price, she would stop the “mark it up to mark it down” game. The money spent on manipulating prices every two weeks, sending out daily promo emails, printing and paying postage for bi-monthly full-color-on-heavy-stock flyers…I just wish it was put towards giving the best everyday price instead of sort of “tricking” customers into a sense of urgency to get a deal before it expires.
I understand that it would be tough to get rid of the coupon game now…it’s too late. JCPenney tried to do that several years ago and it nearly killed them; their clientele was addicted to coupons. But personally it makes me nuts. Whenever there’s a “good” coupon (40%, 50%, 60%)….you run right over to Jo-Ann’s and there’s nothing to use the coupon for, because everything has been marked down by 20% or 30%.
And what is the real price of products at Jo-Ann anyway? The “Keepsake” quality of cotton wovens has jumped from $5.99 up to $9.99 in the past few years. The “Quilter’s” simple two-color prints have jumped from $3.99 to $5.99 (then last week it was 70% off for a couple of days). Basic poly-cotton gingham almost doubled this year, from $4.99 to $8.99. What is the real, best-we-can-negotiate-for-you price of these simple fabrics?
Craft basics like Rit fabric dyes and brand-name glues are double the price at Jo-Ann stores compared to everyday low prices at Walmart.
Then there are the paper sewing patterns. Manufacturer’s pre-printed retail price is anywhere from $10 to $20, but every 6 weeks or so the price goes down to $2. What is the “real” price? Don‘t you hate it when you need a particular pattern and can’t wait for the next two-buck promotion?
Bottom line: if the CEO combined the petition with a move to simplify prices and stop playing all the games, I’d take her message more seriously.
8. Is it really impossible to source fabric in the US? Or is it just easier to go overseas, and maintain a higher gross margin? Fabrics made in China are not subject to the same pollution controls, and the fabric dyeing/printing business is a huge contaminant to the water system. So of course they cost less to produce overseas, but what is the cost to the environment?
Yes the labor cost is lower in China than in the U.S.. The minimum wage regulations and benefits in the U.S. at are a totally different level. However, the increase in robotic production is closing that gap in many industries, and soon the difference in final cost, when you add in transportation, will be minimal. Again consider the pollutant effect of transporting product across the Pacific.
Is it true that the fabric mills are gone in America? Jo-Ann’s already stocks some American cottons, could they have done more (with their 2.4 billion dollar valuation) to promote American fabrics?
I live an hour away from Malden Mills, the original producer of Polarfleece brand. The mills were kept going throughout the economic downturn of the eighties and nineties, despite pressure to move to cheaper-labor countries. The factory burnt to the ground (due to an accidental explosion) in 1995, and everyone thought that was the end, but they rebuilt the factory and kept the jobs in the U.S. Sadly the firm eventually went into bankruptcy and stopped selling fleece in 2007. Would a 25% tariff on China produced fleece have changed the equation, and made it profitable to keep the jobs here in Massachusetts? After all, Jo-Anns sells “40,000,000 yards of fleece every single year“, that could mean a whole lot of jobs.
(Full disclosure: I was in the apparel industry for decades, beginning during the time when apparel really was all made in America by members of the ILGWU, and walking to work meant dodging the guys pushing rolling racks of clothing across the streets in the garment district shouting “Watch your back!”. I remember the shift from American manufacturing to imports, starting with the off-shore production in the Caribbean, then Central America, Asia, and going up to the opening of trade with China. I had no clue how extensive it would end up being.)
Again, if she had combined her petition to cancel the proposed tariff, along with some sort of proposal to support American-made materials, I’d be more impressed.
9. What about sourcing from other countries? China isn’t the only place with fabric mills. When I worked in the garment industry, we were careful to spread out production between a multitude of countries…because “putting all of your eggs in one basket” can be a devastating in manufacturing. There’s always a possibility of natural disaster, worker strikes, currency manipulation, shift in duty rates, quantity quota overload, transportation error (boats do sink).
I’ve worked with mills and factories in India, Sri Lanka, Malaysia, Philippines, South Korea, Taiwan, Indonesia. Sure, working in China has benefits (volume, government incentives, infrastructure) but with some effort there are other places to source weaving/dyeing/printing.