US apparel imports continue to feel weight of China tariffs
The knock-on effect of retailers bringing orders forward to beat the September tariff hike on clothing shipments from China still continues to be felt months later. The volume of US apparel imports dropped for the third consecutive month in October, with shipment volumes from the East Asian supply powerhouse falling by close to a third month-on-month. Meanwhile, rivals Bangladesh and Pakistan were the only countries to book an increase.
The latest figures from the Department of Commerce's Office of Textiles and Apparel (OTEXA) show the volume of US apparel imports from all sources fell 7.3% month-on-month in October to 2.4bn square metre equivalents (SME). The figures also show a 16% decline in volume against the same month last year and a 13% drop in value terms year-on-year to US$7.44bn.
In terms of individual supplier countries, just two of the top-ten recorded a year-on-year increase in volumes in October, with Bangladesh, ranked number three in the top-ten US apparel supplier league table, booking the highest growth at 6.69%.
China – the largest supplier of apparel to the US – saw the biggest decline in shipments at 30.39% year-on-year to 962m SME, with imports from the country tumbling 17.9% month-on-month from the 1.17bn SME recorded in September.
The second-largest US apparel supplier, Vietnam, booked a year-on-year decline of 7.71% to 357m SME – which compares to September's year-on-year increase of 9.57% to 347m.
Of the remaining countries, Pakistan was the only other top-ten supplier to book a rise in shipments during the month of October with a 4.16% increase to 54m SME.
Mexico recorded the second-highest decline with shipments falling 11.91% to 64m SME, closely followed by Indonesia which booked a 9.48% drop to 105m SME, and El Salvador which posted a 9.32% fall in shipments to 64m SME also.
Elsewhere, Cambodia, India and Honduras all also reported declines at 6.74%, 6.01%, and 0.85% respectively.
Combined textile and apparel imports, meanwhile, fell 8.07% year-on-year to 6.26bn SME, and dropped 12% in value terms to $9.87bn. Textiles alone, meanwhile, were down 2.54% to 3.86bn SME and fell by 9.4% in value terms to $2.43bn.
Year-to-date and eight-year overview
While monthly trade data is often volatile, with big swings from one month to the next, a broader view of the year so far shows the value of total US apparel and textile imports was up by 1.74% to $95.73bn in the year-to-date, from $94.01bn in the same period a year ago. Apparel imports grew 2.62% to $72.51bn, while textiles slipped 0.92% to $23.22bn.
All but four of the top ten apparel supplier countries booked growth during the first ten months of the year, with Vietnam seeing the largest increase at 10.88% to 11.67bn SME.
Cambodia registered the second-highest gain, at 10.84% to 2.29bn SME, closely followed by Honduras with a 10.34% rise to 2.33bn SME.
Imports from Bangladesh, meanwhile, increased by 9.98% to 5.09bn SME, with Pakistan and India close behind with growth of 7.42% and 6.9% respectively.
China booked the largest decline at 5.62% to 22.13bn, while Mexico reported a drop of 5.55% to 2.69bn. El Salvador and Indonesia also reported declines, 1.89% fall to 1.57bn and a 0.59% drop to 3.82bn respectively.
Facts behind the figures
The volume of US apparel imports from all sources fell for a third consecutive month in October, with the last increase in shipments seen in July – a 23.7% month-on-month surge to 2.82bn SME. The declines since suggest retailers brought orders forward to the summer months in an effort to beat the September tariff hike on clothing imports from China, with the knock-on effect still being felt three months later.
Apparel imports from China to the US fell by almost one-third (30.39%) year-on-year in October, with shipments tumbling to their lowest level since May.
During August, US president Donald Trump confirmed an additional tariff hike on Chinese imports – including all clothing and footwear – pushing up duties by 15% from 1 September and 15 December.
With China being the largest supplier of clothing to the US, the move naturally sent waves of panic through the industry with many brands noting they were taking steps to reduce their reliance on the supply powerhouse, including American Eagle Outfitters, GIII Apparel Group and Tommy Hilfiger and Calvin Klein-owner PVH Corp.
Also among their number is US fashion retailer Guess Inc, which last week outlined a strategic five-year plan designed to grow the business and boost profitability. To increase operating margin to 10%, the company intends to mitigate China tariffs by moving production out of China, consolidating vendors from 529 to roughly 200, building more direct-to-vendor relationships, and digitising the distribution process, according to a note by Susan Anderson, analyst at B Riley.
The move chimes with a survey by the US Fashion Industry Association (USFIA) earlier this year, which found 83% of respondents expect to decrease sourcing from China over the next two years.
President Trump has warned of plans to "substantially raise" tariffs on Chinese goods should the two sides be unable to finalise the "phase one" trade agreement they are currently negotiating. But there are growing concerns in the US apparel industry that a potential trade deal with China will be delayed until after the 2020 presidential election.
US retailers say this would be a "bad deal for every segment" of the US economy. "The unpredictability created by the administration's mixed messages is only making a bad situation worse. While adding costs to the supply chain via tariffs is bad, not knowing if they will be used in the short-term, long-term, or off-and-on makes it incredibly difficult for businesses to invest and create American jobs," Steve Lamar, executive vice president at the American Apparel and Footwear Association (AAFA), told just-style.
"The apparel and footwear industry needed the tariffs removed yesterday. Suggesting that they could be around until after the 2020 elections is incredibly concerning."
The latest figures from OTEXA continue to suggest industry players are opting to source elsewhere, with neighbouring Southeast Asian countries the favoured alternative for replacing lost production in China, at least in the immediate term.
While it may come as no surprise to see long-time rival Bangladesh booking growth in shipments, Pakistan also seems to be gaining attention of its own, with the second-highest growth in apparel imports for the second consecutive month in October.
Where agricultural production, often supported by workers at below poverty-level wages, forms the backbone of the Pakistan economy, trade has become increasingly important. Textiles and apparel, which benefit from plentiful raw materials such as cotton, and fabric inputs, account for most of Pakistan's export earnings, 40% of the labour force, 46% of manufacturing, and 67% of exports, with the US being the top in a diversified market.
The country recently hosted the 35th International Apparel Federation (IAF) Fashion Convention, co-organised by the Pakistan Readymade Garment Manufacturers and Exporters Association (PRGMEA) in Lahore, the capital of Punjab province – itself a major clothing and textile manufacturing hub.
Indeed, with an improving law and order situation, business-friendly policies from its elected government, and incoming Chinese investment under the Beijing-backed CPEC (China-Pakistan Economic Corridor) programme, executives at the event heard how Pakistan is becoming an increasingly attractive location for foreign direct investment – especially in the textile and clothing sector.
Yet despite Bangladesh and Pakistan's surge in shipments – and indeed its own significant fall – China remains by far the biggest supplier of apparel to the US. Its 22.13bn SME in exports in the year to October far outstrip the closest competition from Vietnam at 11.67bn SME and Bangladesh at 5.09bn SME.