While the United States is advancing in trade agreements with Canada, Mexico, and Korea, China holds less promise. President Trump declared there would new tariffs enacted on Chinese imports to the tune of $200 billion. To counter, China has sanctioned $60 billion in new duties on U.S. goods, according to South China Morning Post.
The Trade War Escalates
In a swift action, China endorsed an additional 10 percent tariff added on over 3,000 of U.S. products. Although, a small group of U.S. goods managed only to get hit with a 5 percent tariff. Sourcing Journal Onlinereported that if the trade war escalates to “phase three” Trump stated he would place taxes on all Chinese imports coming to the U.S. He added that, “we could go $267 billion more”.
Will Fashion Take a Hit?
The apparel industry is heavily intertwined with China, due to sourcing and production. Soon, garments bearing the “Made in China” will have less of a market share or carry a higher price tag. Although the last round of tariffs misses a good portion of apparel, accessories did not fare as well. Specific accessories and textiles such as handbags and leather gloves, yarns, leathers, and cotton did get by unscathed. Companies will need to comprise a diverse sourcing strategy if they wish to exclude some of their supply chains from the new tariffs.
The Effect on Consumers
While not all firms will feel the hit, most consumers will. A Moody’s report explained that luxury brands with less price sensitivity would pass on the additional cost to consumers. Larger companies with stronger profit margins may absorb the loss. The others will need to employ other tactics to keep businesses afloat such as adjusting product designs and cutting costs within their organization.