by Jasmin Malik Chua | January 19, 2024
The tariff-fueled trade war instituted under President Donald Trump and extended by President Joe Biden is an obvious cause of a palpable slide since 2017, when Chinese goods comprised more than 21 percent of inbound shipments to the United States.
But measures such as the Uyghur Forced Labor Prevention Act (UFLPA), which essentially bars any products made in whole or in part in China’s Xinjiang Uyghur Autonomous Region, have also led U.S. fashion companies to reduce their China exposure, said Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware. Less than 12 percent of U.S. cotton apparel imports in the first 11 months of 2023, in fact, originated from the country, he said, a “straight five-year decline” from nearly 30 percent in 2018.
The data, Lu said, lines up with his research into American fashion purveyors’ China sourcing strategies. Perusing the annual reports of the 30 largest companies from 2019 to 2022, he found that one-third of them “explicitly mentioned” that they had reduced finished garments sourcing from China and would continue to do so going forward.
“Companies also cited forced labor and geopolitics as their top concerns associated with sourcing from China,” Lu said.
Even so, increasing diversification—the so-called “China plus one” strategy—isn’t likely to significantly diminish China’s position in the broader trade landscape. Many supply chains outside of China remain highly dependent on the country’s raw materials. Take Vietnam, which has to date surpassed China in the value of freight blocked by Customs and Border Protection under the UFLPA—$10 million versus $2 million.
“Even though fewer finished garments are coming from China, U.S. fashion companies admit that China will continue to play a critical role as a textile raw material supplier as no immediate practical alternative is available,” Lu said. “In other words, because textile manufacturing relies heavily on capital and technology, building textile production capacity outside China will be considerably longer and more challenging than finished garments.”
“Besides forced labor and Section 301 tariffs, we might see trade tensions between the two countries extend further to the U.S. de minimis rule reform, potentially negatively affecting China’s e-commerce business owners,” Lu said. “Election-year politics could also bring new political instability to bilateral trade relations.”
Still, there’s a popular misconception that American fashion firms source from China for “cheap products.” He pointed to a U.S. Fashion Industry Association benchmarking study that saw them rate China as the “most competitive” in terms of fulfilling sourcing orders in relatively small volumes but with great variety. The “flexibility and agility” that China offers, then, is key.
“One of my recent studies shows that, on average, U.S. fashion companies’ contracted garment factories in China were much smaller than those in Vietnam, Bangladesh and Sri Lanka, suggesting Chinese factories are more likely to fulfill smaller sourcing orders,” Lu said.