Tires are still the big winner in Texas, but new tariffs on apparel could hurt the industry
Tires and other apparel are still growing in Texas.
They account for a quarter of the state’s annual retail sales.
But that growth is slowing, and a proposed tariff could hurt a business that’s already losing market share to imports.
The tariffs could push manufacturers out of Texas and hurt the state economy, according to a study by the Austin-based consulting firm McKinsey & Co. It could also hurt the Texas economy because it could make it harder for consumers to buy new apparel.
Tires have been the biggest beneficiary of the tariffs, accounting for more than $200 billion in new spending last year, according the report.
Manufacturers say the tariffs would hurt their business, and they have already threatened to leave the state if the tariffs are enacted.
But with the election coming up next year, some lawmakers are taking a wait-and-see approach.
“This is a new dynamic for Texas,” said state Rep. Jason Villalba, a Republican who represents parts of Dallas and Houston.
“The question is, are we going to allow this to happen?
I don’t think we should be trying to make it easier for our competitors to go out of business.”
Texas is already one of the most expensive states for apparel manufacturers.
That has increased as the country has slowed its manufacturing recovery, and many are also struggling to adapt to new technologies.
The price of a pair of Nike shoes has more than tripled in the past year, and the cost of a new pair of shoes has increased by more than half in the last three years.
The prices of consumer goods have also risen, driven by inflation.
Texas, like most states, has an income tax and sales tax, and those taxes have been among the top tax breaks for manufacturers.
The tax credits are available for almost all manufacturers, but the tariffs could be one of a series of tax breaks designed to help the industry.
If the tariffs do go into effect, the industry would lose about $4 billion a year in tax revenue, according McKinsey.
Manufactures could also lose about half their business by not receiving the tax credits, the consulting firm said.
The Texas legislature last year approved a $1.2 billion package of new tariffs designed to boost exports.
The state is also considering other new tariffs that could be more damaging.
The House of Representatives approved a bill that would cut off state aid to companies that import cheap Chinese clothes.
But the bill also would cut federal aid to the textile industry by $200 million.
A bill that the Senate is considering also could cut off the aid to textile manufacturers.
Both measures are aimed at helping manufacturers expand in Texas and make more money, and some lawmakers want to give them more power.
The Legislature has been debating the tariffs since November.
The proposals would affect more than a dozen industries, including textile, apparel, auto parts, construction and food.
But lawmakers are working with a coalition of companies, unions and labor groups to reach a compromise on the tariffs.
The bill passed the House but failed in the Senate.
Texas’s textile and apparel industries are among the most competitive in the country, and it’s not clear how the tariffs will affect them.
The U.S. Department of Commerce, which has long favored tariffs on imports, said it supports tariffs on imported clothing and footwear, but that tariffs are only an effective way to protect U.s. producers and consumers.
“Treaties should not be a vehicle for government to impose arbitrary tariffs on domestic industries and businesses,” said U.C. Davis professor of economics Michael W. Woodson.
“We cannot afford to be the ones who have to live with this.”
McKinsey said that the tariffs “will have a significant impact on textile and clothing manufacturers in Texas.”
The tariffs would not apply to imports of footwear or apparel that were made by companies that aren’t part of the Texas textile industry, such as manufacturers of furniture and home goods, the company said.
It would also apply to garments that are made by other companies that are part of Texas’ apparel industry.
McKinsey’s study was based on data from the Bureau of Labor Statistics.