US spending $120m annually on tariff to save coat-hangers - Emirates24|7

US spending $120m annually on tariff to save coat-hangers

A fascinating example has emerged in the United States of how expensive it is to keep globalisation at bay – the example being wire coat-hangers.

The US recently imposed import tariffs on hangers from China, giving in to an American lobby that argued that China was dumping hangers in the US – selling at below cost in an unfair move to put American competition out of business.

This led to a number of reports indicating that America's dry cleaners are up in arms – having to effectively pay higher prices for hangers because of the tariffs. Now, an American economist called Brandon Fuller, who runs a blog for economics students called Aplia, has done some interesting number crunching on the back of this.

Apparently, there are roughly 30,000 dry cleaners in the US, and on average, each pays an additional $4,000 (Dh14,680) per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million, Fuller says, adding that according to official reports US employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006.

He notes: "Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff 'saves' 564 jobs. Dividing the cost of the tariff to US dry cleaners [$120m year] by the number of jobs saved [564] indicates that each job saved costs about $212,765 per year.

"Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job."