The Friday Report: October 4, 2019

U.S. Announces Tariffs on $7.5 Billion of EU Goods

Following the recent decision by the World Trade Organization (WTO), the U.S. Trade Representative announced changes to tariff rates for EU goods.  Beginning on October 18th, the United States will begin charging a 10% tariff on large civil aircraft and 25% on agricultural and other goods.

The issue at stake in the WTO decision involved the low interest rates that had been granted to Airbus.  In its claim, the United States made a case that this was the equivalent of subsidies for the manufacturer.  The World Trade Organization ruled that the lower interest rates were damaging to the interests of U.S. aircraft manufacturers and found that the United States has the right to levy tariffs in response.  The issue had been ongoing since 2005.  In April, the United States requested approval from the WTO to approve tariffs on $11 billion in EU goods, the estimated equivalence of the harm that the EU subsidies to Airbus had caused.

It should be noted that the EU has filed a parallel WTO case against U.S. aircraft maker Boeing.  It specifies that American support for the airline manufacturer has disadvantaged European firms similarly.  The complaint has not yet been addressed.

Goods subject to the new October 18th tariffs include luxury apparel, cheese, seafood and steel and will be levied primarily against imports from the U.K., France, Germany and Spain, the four countries which supported Airbus.  The United States has until November 17th to decide if it will implement 5%-10% tariffs on imported EU vehicles and auto parts as well.  The tariffs may also increase costs for American auto companies and hurt the industry.  President Trump has long promoted the use of tariffs on automobiles as a means of reinvigorating the American vehicle manufacturing industry.  Approximately 1 in 6 cars produced in the United States are from EU-based companies and European auto manufacturers created 420,000 jobs in the U.S.

Popular Fast Fashion Retailer Forever 21 Files for Bankruptcy

Announcing it would close 178 of its 600 American stores, Forever 21 is forging ahead to write a new chapter in the history of the 34-year old company.  Forever 21 has obtained numerous loans, including a $275 million loan from JPMorgan Chase Bank and is planning to plough ahead in a “business as usual” manner.

Between intense online competition, too many stores and the fading popularity of “cheap chic” fashion, Forever 21 lost its way after opening hundreds of stores in American shopping malls.  Specialists in fast fashion, Forever 21 was able to make trendy clothing rapidly available to trend-following consumers who aimed at duplicating celebrity looks.

Industry competitor H&M, a Stockholm Sweden-based fast fashion mogul is likewise struggling.  With college students as key consumers, both brands have suffered from a lack of ingenuity and personal expression, key traits valued by this generation.  Younger shoppers tend to now favor more unique fashion looks, eschewing Forever 21 and H&M for their “cookie cutter” approach.  These factors in addition to the rapidly expanding e-commerce market have forced Forever 21 to take a long hard look at the evolution of their brand in order to secure its future.

Expanding Skills Gap Delays Hiring for Thousands of Positions in U.S. Manufacturing

As of September 2019, a record 522,000 jobs remained unfilled due to a lack of trained American workers in the manufacturing sector.  This has been the top concern in the American manufacturing industry for the past six quarters according to the National Association of Manufacturers. 

The talent shortage is anticipated to cost the United States $454 billion by 2028, up from $48 billion in 2018. 4.6 million jobs will need to be filled in the manufacturing industry over the next ten years.  An industry report by Deloitte and The Manufacturing Institute indicated that 2.4 million jobs may be left unfilled due to a lack of trained workers.

Manufacturers today require workers with technical skills and aptitude as well as a willingness to continue learning, especially as it involves new and emerging technologies.  With recent news that American manufacturing had been reduced to its weakest level in a decade, there is even more pressure on the industry to solve the talent shortage problem.