Fashion Intel & Analysis
Following up on the update from Ryan Lynch at BSI during yesterday’s State of the Industry Virtual Townhall, there is a growing movement of companies that are boycotting Brazilian leather in their supply chain. Following the announcement from VF Corporation, now H&M also is stopping purchases of Brazilian leather and leather products due to the concerns that the country’s cattle industry has contributed to the Amazon wildfires. A 2016 report from the United Nations’ Food and Agriculture Organization linked 80 percent of deforestation in the country to cattle grazing.
A group of Democrat Senators are also urging action in response to the Amazon fires. Eleven senators signed a letter to U.S. Trade Representative Lighthizer saying trade talks with Brazil must be postponed until President Jair Bolsonaro takes action to protect the Amazon rainforest. “We urge you to postpone any negotiations regarding a trade agreement with Brazil until President Jair Bolsonaro takes decisive action to protect the Amazon rainforest, including active enforcement of Brazil’s environmental laws to deter illegal deforestation, reinstatement of protections for indigenous communities, restoration of full funding and authorities to environmental regulators, and prosecution of violators who commit illegal deforestation.”
Brands are being urged to avoid Myanmar suppliers linked to the country’s military after a new U.N. report reveals the military has used its own business to “support brutal operations against ethnic groups that constitute serious crimes under international law, bypassing civilian oversight and evading accountability.” The Fact Finding Mission on Myanmar found that at least 15 foreign companies have joint ventures with the Tatmadaw, the official name of the armed forces in Myanmar, and at least 44 companies have other forms of commercial ties with Tatmadaw businesses. The report names three garment manufacturers: Guotai Guohua Garment Myanmar Ld owned by Jiangsu Guotai Guohua Shiye; Perfect Gains Garments Manufacturing Ltd owned by Evergain Trading Garments; and Sewell Garment Myanmar Industrial Co.
Esprit has announced they will no longer work with a garment factory in Southern Myanmar while Next, Bestseller, H&M, Marks & Spencer, and C&A said they will review the report and monitor the situation.
As you have seen reported this morning, the Chinese government announced today that they will respond to the U.S. Tranche 4 tariffs by increasing their own tariffs on $75 billion of U.S. exports to China. So far we have not seen the details of this announcement. We have, however, started to hear rumors expressing concern that the Trump Administration will respond by increasing the 10% tariffs on List A of Tranche 4. While of course there may be a tweet that responds to the action by China, USFIA can say that, at this time, there is no planned Administration response. Peter Navarro, director of the Office of Trade and Manufacturing Policy in the White House, said the Chinese action was "well anticipated." Stay tuned for additional information as it is available.
As we feared, before heading off to the G-7, President Trump has just announced via Twitter that he will escalate the trade war with China. The September 1st tariffs on apparel, home textiles, footwear and other consumer products on List A of Tranche 4 will now be assessed at 15% instead of 10%. And the many consumer products on Tranche 3 will see the duty increase to 30% on October 1st (as well as all products on Tranche 1 and Tranche 2). USFIA will join with other industry groups to push back on these increases, and we will be asking for a delay in the imposition of any additional tariffs on fashion products. We will send additional updates when we have more information.