China-US trade dispute leaves American fashion firms in fear of being stitched up

Two-thirds of companies polled in industry survey say they are planning to reduce the amount of goods they buy from China

PUBLISHED : Thursday, 19 July, 2018, 9:17pm
UPDATED : Friday, 20 July, 2018, 10:42am

American fashion brands and retailers are planning to reduce their reliance on Chinese apparel suppliers due to concerns over the growing trade dispute between the two countries, according to an industry report published this week.

Released on Wednesday, the “Fashion Industry Benchmarking Study” said that for the second year in a row, the “protectionist trade policy agenda in the United States” ranked the biggest challenge to the nation’s fashion industry.

Although apparel has not been included on any of the tariff lists traded or threatened by Beijing and Washington – except for a handful of niche products – the fear it might soon be has unnerved buyers, the report said.

Its author, Sheng Lu, a professor at the University of Delaware’s Department of Fashion & Apparel Studies, said firms had been spooked by the threat of tariffs and that two-thirds of them were planning to reduce the amount of goods they bought from China over the next two years.

“This does not seem to be due to concerns about cost, but rather worries about the escalating US-China trade tensions,” he said.

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Produced by the US Fashion Industry Association, the annual study is based on responses from 28 executives of large, predominately US-based, fashion retailers, importers and wholesalers, the majority of which have 1,000 or more employees and half of which have offices outside the US.

The association’s board comprises representatives from Levi Strauss, Macy’s, JC Penny and Ralph Lauren, among others.

According to US government data included in the report, the volume of apparel imported by the US from China in the first five months of this year fell by 1.2 per cent from the equivalent period of 2017, despite the figure for all such imports rising by 1.5 per cent. Similarly, in the first four months of 2018, the value of America’s apparel imports from China fell by 1.6 per cent, while the total for all countries rose by 1.7 per cent.

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Although China remains the United States’ primary source of apparel imports, its market share has been falling steadily, from a high of 39.2 per cent in 2010 to 33.7 per cent last year, and just 29.8 per cent for the first five months of 2018, according to US government data.

Lu said that as US buyers continued to diversify, suppliers in Southeast and South Asia would be the first to benefit.

“Vietnam and Bangladesh are expected to play a bigger role as apparel suppliers to the US market,” he said.

Koushan Das, head of Dezan Shira’s Business Intelligence Unit for South Asia, agreed, but said the move away from China by US buyers had not been driven by the current trade dispute.

“Chinese textiles and apparel exports to the US have declined in the past 24 months mostly due to China-centric issues such as reduced margins, rising wages, and manufacturers shifting to Vietnam, Bangladesh and Cambodia,” he said.

“Trade protectionism policies [have] played only a small role. The impact on production and trade [of the dispute] will be clearer by the end of 2018.”

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George Jing, a manager at the Chinese hat manufacturer Zhenjiang Kimtex Industrial, which sells to the US, said many American buyers were sourcing their goods from Southeast Asian nations, like Cambodia, and also from countries closer to home, like Mexico.

“Their manufacturing costs are very low, so a lot of orders are going to Southeast Asia,” he said.

The answer for Chinese firms, he said, was to get smart.

“If you continue your business the way you always have and don’t change, you can’t compete – your portion of the cake will just get smaller and smaller,” he said.

“So we have to launch new products and increase the hi-tech components of our products, to make them higher quality.”

Additional reporting by Sarah Zheng