Hush, Here Comes the Not ‐​So‐​Little Baby Tax

Gabriella Beaumont-SmithThe U.S. baby formula industry is in trouble. For most of 2022, parents faced bare shelves when looking for formula. Even in the last week,34 percent of households reported difficulty finding formula. What ’s more depressing, Reckitt Benckiser, an infant formula producer, expects low supplies topersist into the spring.While reports of problems began in August 2021, alarm bells didn ’t ring until theshutdown of a major U.S. plant in early 2022. The shutdown caused a massive supply shock and by June 2022, national out-of-stock levels of infant formulaexceeded90 percent. The crisis wasn ’t just bad luck but a perfect storm of supply chain disruptions and longstanding bad policy, made worse by a slow and lackluster response from policymakers.Policymakers provided “band aid” solutions that slightly helped but conditions are far from stable. However, to make things worse, one of the more effective fixes —the suspension of prohibitive tariffs on imports of infant formula—is set to expire on December 31, 2022. Given Reckitt’s expectation that low supplies will extend into the spring, the expiration of the tariff suspension is nonsensical and problematic. Figure 1 illustrates the baby tax set to return on January 1, 2023.Back in May, Iwrote about the myriad trade restrictions that limit infant formula imports. Firstly, baby formula is subject to complex tariff-rate quotas (TRQs). The Congressional Research Service estimates that more than 80 per...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs