How Have the Apparel Trade Flows Reacted to the Section 301 Tariff Action against China? (updated August 2018)

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  • Apparel products are not subject to the Section 301 tariff yet. Neither the $34 billion product list (subject to the 25% additional tariff rate since July 6, 2018) nor the newly proposed $200 billion product list covers wearing apparel (HS Chapters 61 and 62). The current tariff rates will remain unchanged for now.
  • Nevertheless, the Section 301 tariff action has created huge market uncertainties for U.S. fashion brands and apparel retailers. Uncertainty hurts business. The monthly trade flows of U.S. apparel imports from China have also turned more fluctuating this year.
  • Seasonally adjusted data shows that between January-June 2018, the total U.S. apparel imports increased by 1.2 percent in volume and 2.2 percent in value year on year—largely due to the improved U.S. economy which creates more import demand. However, over the same period, the value of U.S. apparel imports from China decreased by 0.8 percent in volume and 2.0 percent in value year on year. Also, in the first half of 2018, China accounted for less than 30% of U.S. apparel imports in value terms, the first time since 2007.

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  • After all, cost concern does NOT seem to be the most influential factor that drives companies to source less from China. The average unit price of U.S. apparel imports from China dropped from $2.5/SME in 2016, $2.38/SME in 2017 to $2.33/SME in the first half of 2018.

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  • In response to the market uncertainty, US importers have already started to accelerate diversifying their sourcing base. Interesting enough, while China’s share in the U.S. apparel import market is declining, there is no single alternative to “Made in China.” Notably, the market shares of Vietnam, Bangladesh, NAFTA and CAFTA only marginally increased in 2018 compared with a year ago. Again, companies’ immediate strategy is to diversify sourcing.
  • In the short run, the volume of US textile and apparel imports from China is likely to go up since US importers are eager to complete their sourcing orders before the tariff hit.  Usually, companies place sourcing orders several months ahead of the season. If the market uncertainty lasts, the real negative impact will be reflected in the trade data later this year or next year. 
  • Last but not least, the Section 301 action is driven by politics. It is insufficient to just calculate the economic costs and benefits; the political costs should be considered as well.

Data source: Office of Textiles and Apparel (OTEXA), US Department of Commerce

by Sheng Lu

Author: Sheng Lu

Professor @ University of Delaware

4 thoughts on “How Have the Apparel Trade Flows Reacted to the Section 301 Tariff Action against China? (updated August 2018)”

  1. I never think it is a good idea when brands like in this article, US brands face uncertainty. It always makes me nervous for our economy. I think its interesting that US imports have gone up but our imports from China have gone down. It makes me wonder what is changing in the textile industry because China used to be our main supplier. Also I do not think it is a good thing our imports are going up especially since our president is doing everything in his power to decrease imports and increase domestic jobs and production. “In the first half of 2018, China accounted for less than 30% of U.S. apparel imports in value terms, the first time since 2007.” The article explains that its not price driving the two nations apart, after all China prices are almost at rock bottom. I think its interesting that the article explains that there is not alternative to “Made in China”, so what are we going to do?! I thought this part of the blog was interesting as well, “In the short run, the volume of US textile and apparel imports from China is likely to go up since US importers are eager to complete their sourcing orders before the tariff hit.” I think this is so fascinating and I am curious to see results later on when the tariff is complete and more time has passed.

  2. I think this article is extremely interesting and particularly regarding the fact that US importers have already started to accelerate diversifying their sourcing base in response to the marketing uncertainty. Uncertainly definitely does affect business and its interesting that cost is really not the most influential factor that is driving companies to source less than China. It’ll be interesting to see if the market uncertainty lasts and if it will still have a negative affect on trade.

    1. Agree! The trade data from the US Department of Commerce shows that China’s market shares in the US apparel import markets declined to 29.6% in the first half of 2018–the first time below 30% since 2007. ASEAN’s market shares increased from 25.5% in 2017 to 26.7% in the first half of 2018.

      On the other hand, Chinese factories are trying to diversify their export markets too. My research shows that currently, about 55% of Chinese overseas investment in the textile and industry went to Southeast Asia, particularly Myanmar, Cambodia, and Vietnam. i think the trade war will accelerate the process.

      Here is another interesting article showing how Vietnam might got hurt by the US-China tariff war too: https://www.nytimes.com/2018/08/29/magazine/can-vietnam-avoid-getting-hurt-in-the-crossfire-when-the-tariffs-are-flying.html

      Again, we live in a globalized world today!

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