Several Asian countries look set to make gains as the USA threatens to impose additional tariffs on clothing imports from China

Several Asian countries look set to make gains in the US clothing import market if the USA carries out its threat to impose additional tariffs on clothing imports from China, according to a report in issue 42 of Global Apparel Markets from the global business information company Textiles Intelligence.

The USA has begun the legal process which is necessary to impose additional tariffs on virtually all remaining imports from China which are not already subject to the tariffs, including clothing, after it imposed additional tariffs on US$200 billion worth of imports from China in May 2019.

China continued to be the USA’s largest clothing supplier in 2018, and imports from the country rose during the year to a record high. However, the average price of US clothing imports from China fell to its lowest level on record, and China became the cheapest supplier among the leading ten.

Suppliers in China have been under pressure in recent years to reduce their prices in order to maintain order volumes. But if additional tariffs are imposed, the landed prices of imports from these suppliers will rise and this will negatively affect imports from the country.

As a result, the switch in sourcing away from China which has been apparent in recent years will accelerate, and other major supplying countries in Asia, especially India and Vietnam, are likely to make gains.

Also set to benefit are the industries in Bangladesh, Cambodia, Indonesia and Sri Lanka — despite the fact that US imports from each of these four countries have either stalled or declined in recent years.

In South and Central America, however, suppliers in El Salvador, Honduras and Mexico are likely to continue to struggle to maintain orders.

In order to offset any decline in US clothing imports from China, and maintain production levels, Chinese producers may set up outward processing arrangements (OPAs) with their counterparts in other Asian countries so that the operations which determine a garment’s origin, such as sewing, are performed in other countries while operations which do not affect a garment’s origin, such as minor sewing, finishing and packaging, are carried out in China.

Garments manufactured in this way would be deemed to have originated in other Asian countries, rather than China, and as a result they would not be subject to additional tariffs.

However, it is still not certain whether the additional tariffs on imports of clothing will be imposed at all.

 

Source: https://www.textilesintelligence.com