Effect of tax on Vietnamese hangers

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Table of Contents

Introduction
Effects of the Duty
Conclusion
Works Cited

Introduction

The U.S. government is very clear on the affirmative final determination on antidumping duty order on steel wire garment hangers from Vietnam. Although the legislation became effective on February 5, 2013, the act was published on December 26, 2012. The products affected include steel wire garment hangers that are fabricated, galvanized, painted, coated with epoxy or latex, and those fashioned with paper covers among others.

This action was taken because the government of Vietnam had highly subsidized the manufacturing process of hangers thereby making the hangers from Vietnam cheap and affordable as compared to the products manufactured from the local market in U.S. The U.S. government felt that Vietnam was dumping her hangers in the U.S. market.

Effects of the Duty

Six months before the publication of the affirmative final determination, the government had imposed temporary duties on the affected products (CNN 1). The publication of the act means that the duties of one hundred and eighty-seven percent imposed on the products are permanent from the effective date i.e. February 5, 2013.

It is clear that Vietnam is the top exporter of wire hangers. However, the antidumping duties did not affect the wooden hangers that are manufactured by Vietnam in large amounts (CNN 1). The effects of the duty have already been felt in the U.S. and other parts of the world.

To begin with, the duty imposed on the hangers forced the wholesale prices of the hangers to rise. Dry cleaning companies experienced a ten to fifteen percent increase in the price of the affected goods. For instance, initially, forty dollars would help a businessperson acquire five hundred hangers.

However, that has changed since the same amount of money gives the businessperson half the amount of goods. The drycleaners effectively passed over the same to the consumers thereby increasing the overall charge on consumers by an average margin of two percent. This has seen customers reduce the amount they spent on dry cleaning. The companies currently receive half the total revenue they used to receive due to reduced quantity of work.

The sharp increase in prices has forced some dry cleaning companies to close down. This could also be attributed to the fact that some manufacturing companies have diverted their businesses to other business lines (O’Brien 57). This hurts the U.S. economy since job opportunities are lost as they are created in other markets such as Cambodia.

The people who were working in the firms have to look for work elsewhere. In the process, the government was losing revenue through taxes. High prices have ultimately reduced profits made by dry cleaning firms to a level of making just enough money to pay the recurrent bills and rent.

When people get more income, they are likely to spend more through their disposable income or the amount kept aside for investment. The government encourages investments from the private sector.

For instance, when an entrepreneur quits a government job to begin private business, the merits accrued from such an action are not enjoyed when they close down following high prices arising from government tax. The impact of the duties is clearly indicated when beneficial projects are no longer beneficial. Some dry cleaning shops have closed down yet the remaining ones do not feel the positive impact.

Conclusion

The analysis of this duty shows that the only winners are the foreign governments such as Cambodia who have benefited when other manufacturing companies relocated. Other countries other than the U.S. received new investors hence began to enjoy the advantages that accompanied the U.S. affirmative final determination. The other groups are all losers including the governments U.S., and Vietnam, the dry cleaning companies, the entrepreneurs, and the employees.

Works Cited

CNN, Money. Trade penalties squeeze US dry cleaners, New York: CNN Money journal, 2012. Print.

O’Brien, Hubbart, Macroeconomics, New York: Pearson Publishers, 2012. Print.

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Effect of tax on Vietnamese hangers

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