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US and China Tariffs Impact on the Global Textile

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It is difficult to know who will be winners and who will be losers when it comes to tariffs on textiles. On one hand consumers in the US that rely on cheap imports of textile products from China will have to pay more. On the other hand the US is the biggest market for Chinese textile products and any reduction in this market will have a huge impact on the health of this industry in China.

 

It should be pointed out that in the last 10 years China’s textile manufacturing has increasingly been supplying to the domestic market, that now consumes just under 50% of its total output.

 

So, who will win and who will lose – an article published by ikarltd.com provides some insight to these questions.

The market cap of the global apparel manufacturing market is estimated to be totalled $900.3 billion in 2018, with an estimated annual growth of 6% during 2019. In the past years, the global textile manufacturing market has witnessed a significant growth rate, benefiting from relatively comfortable trade economics.

China is the world’s top textile exporter with 40% of the world’s textiles and clothing exports. The textile and clothing industry is the largest manufacturing industry in China with about 24,000 enterprises. It has the largest production capacity for textile products consisting of cotton, synthetic fibers, and silk. To better understand the scale of the Chinese textile industry, its worth noting that it accounts for about 5% of the energy used for manufacturing in China, while this share is less than 2% in the US.

Effect on US retailers and brands

As 41% of the goods manufactured in China are being sold domestically, the rest is being exported to other markets throughout the world, with the US market is the biggest of them (16%). On August 2018, the office of the US Trade representative has announced by the order of the US President, a new 10% tariff on $200 billion worth of Chinese imports will be imposed. The list includes more than 6,000 Consumer goods such as clothing, handbags, cosmetics, leather, and soap.

Donald Trump’s trade war with China is expected to affect the retailers and brands of US as the outcome of the new tariffs would be higher prices on those consumer goods listed for American shoppers, something that American brand and retailers selling those items have feared for months now. The nation’s top retailers aren’t keeping quiet about the tariffs and potential for revenge tariffs. More than 100 companies including Nike and Walmart urged Trump not to put new duties on products coming from China arguing they would hurt American Consumers and businesses as they hiked up prices while having no effect on China’s attitude towards Us intellectual property.

The US vs China trade war has also given the opportunity to the Asian competitors of China like Cambodia, Vietnam, and Bangladesh to pick up their market shares in the US market.
Nonetheless, the migration of customers from China to other countries of origin might cause the global industry to lose key benefits and advantages that the Chinese industry still hold.
Advantages such as a well-developed production infrastructure, that enable the Chinese industry to be more efficient compared to its foreign counterparts, will be eliminated once retailers will migrate to other, smaller and less developed manufacturing origins.

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