Day one of the ATSC (Apparel Textile Sourcing Canada) trade show I had the pleasure to watch and listen to the “Trade Wars and Sourcing” presentation put on Julia Hughes from the USFIA (the United States Fashion Industry Association).
I greatly appreciate Julia’s transparency and honesty about the industry in the U.S., her knowledge and insights about the future of the apparel business in America. How tariffs are affecting the industry and exploring opportunities for future growth.
The moto of the USFIA is “Fashion made possible by global trade” as they recognize the importance of global trade in fashion.
USFIA has three main objectives:
- Communication, stay on top of what’s happening in the industry
- Education, providing webinars, meetings, and seminars to educate their members
- Advocacy, supportive of USMCA (the United States Mexico Canada Free Trade Agreement) and they are against Tariffs.
The main office of USFIA is located in Washington, D.C. blocks away from the White House, to support members needs, wants, and desires.
Since Donald Trump has become president, he has:
- Withdrawn from the Trans-Pacific Partnership (TPP)
- Renegotiated U.S.-Korea Free Trade Agreement
- Renegotiated NAFTA (now called USMCA)
- Imposed new section 301 penalty tariffs on imports from China
- Targets forced technology transfers, unfair licensing requirements, and IPR violations
The hardline trade policy of the Trump administration has generated $33.8 Billion in additional tariffs since August 14th.
Section 301 Tariffs
The U.S. Section 301 tariff measures on Chinese products:
10 percent tariff starts on September 1st will affect the following commodities:
- 90% of apparel, Chapter 61 – Knit Apparel and Chapter 62 – Woven Apparel
- Two-thirds of home textiles, Chapter 63 – Home Textiles
- 50% of footwear, Chapter 64 – Footwear
Thankfully some of the 10 percent tariffs has been delayed for some products until December 15th. The products delayed are where China supplies more than 75% of the U.S. imports (at the 8 digit HTS level)
The Trump Administration is threatening more 301 cases against major trading partners including but not limited to India and Vietnam.
Apparel Sourcing Trends 2019
- Asia will remain the leading source for apparel.
- The leading destination for home textiles and travel goods is Asia.
- China will retain the number one spot for U.S. apparel exports
- The fastest-growing apparel suppliers have duty- free access.
- Costs will continue to rise around the world, with developing countries offering lower price options.
- Duty-free programs offer sourcing opportunities.
The Fastest Growing Apparel countries in 2019 (January – June):
- Ethiopia – up 80%
- Madagascar – up 30%
- Jordan – up 24%
- Morocco – up 22%
- Myanmar – up 21%
- Turkey – up 18%
How Executives Rank Sourcing Options:
What’s on the horizon:
- Major threat – Continuing escalation of the trade war with China
- More enforcement actions by U.S. Customs and Border Protection, including the impact of new leadership and staff shifts to immigration
- Congressional consideration of the new NAFTA (USMCA)
- Trump Administration negotiations for a bilateral trade agreement with Japan and close to starting talks with the European Union. The UK on hold until BREXIT. On the horizon: Africa (Kenya is the top option), Philippines, Brazil, and Switzerland.
- Key issues for textile and apparel companies are more complicated than just trade
- Industry upheaval from corporate bankruptcies and restructuring and store closures
- 7,657 store closures in the first seven months of 2019, compared to 5,524 store closures in 2018
- Shifts in consumer demand affecting apparel and footwear
The USA market is still the largest economy and market, as China challenges America for the number one spot there is a struggle for power and dominance with neither country wanting to let the other country win. It will be interesting to watch the next five years in business between the two countries.
I would like to thank Julia for sharing her presentation with me to help publish and share this report. I appreciate and acknowledge Julia for all the great work she and her team are doing to improve the industry. Thank you.