Background
In March 2026, the Office of the U.S. Trade Representative (USTR) initiated a new Section 301 investigation on Structural Excess Capacity and Production in Manufacturing Sectors. USTR defined “structural excess capacity” as “underutilized industrial production capacity that is sustained through governmental interventions or policies incentivizing companies to maintain or grow their unused capacity inefficiently.”
The investigation departs from a conventional Section 301 investigation in several ways: 1) instead of targeting a single country, the investigation targets as many as 16 countries, including China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan and India ; 2) instead of targeting a specific policy practice, the investigation targets “structural excess capacity and production,” which can be linked to many different practices, such as government subsidies and state-owned enterprises (SOEs); 3) instead of focusing on a specific sector, the investigation is cross-sectoral, which could include textiles and apparel and extend to the entire manufacturing sector.
During the public comment period, several leading U.S. and foreign textile and apparel trade associations and companies submitted their comments regarding the investigation and proposed policy actions. These comments disagree on whether “structural excess capacity” existed in the textile and apparel industries and on whether additional U.S. import tariffs would be the appropriate approach to address the problem.
Arguments that there is a “structural excess capacity” problem in textiles and apparel
U.S.-based textile manufacturers and associated industry groups, in general, argue that there is a “structural excess capacity” problem in textiles and apparel manufacturing. They believe that excessive capacity exists when production infrastructure is built and maintained beyond what market demand alone would support and justify. They also regard government intervention, such as providing subsidies, as a main cause of the excess capacity problem. These groups primarily cite perceived low utilization of production capacity and government policy documents as their supporting evidence. Specifically:
- Unifi Manufacturing Ltd. (“Unifi”) and Nan Ya Plastics “Nan Ya” (note: U.S.-based textile yarn producers): Data from subscription service Wood Mackenzie showed that textured filament production capacity utilization rate in several Asian countries remained “low” or “underutilized,” including Bangladesh (66% in 2025 and 66% in 2026), China (74% in 2025 and 75% in 2026), India (70% in 2025 and 67% in 2026), Malaysia (65% in 2025 and 64% in 2026), Pakistan (both 68% in 2025 and 2026), South Korea (47% in 2025 and 45% in 2026), Taiwan (41% in 2025 and 40% in 2026) and Vietnam (35% in 2024 and 37% in 2026).
- National Council of Textile Organizations, NCTO (note: representing U.S.-domestic textile manufacturers): “China’s 15th Five-Year Plan (2026-2030) indicates textile and apparel production will continue to receive special government attention with its commitment to expand supply of high quality textiles…China’s history of providing subsidies and investment in manufacturing capacity, both centrally and locally, even when demand declines, allows companies operating in the country to maintain high production levels despite declining profits…These market dynamics have led to China’s rise as the world’s number one supplier of cheap apparel, which has dropped in price by roughly 28 percent since 2019.” (Note: No data source provided in the submitted comment, but it could refer to the OTEXA average unit price of U.S. apparel imports from China, calculated by $ per square meter equivalent). NCTO also claimed that Southeast Asian countries such as Vietnam, Bangladesh, and Cambodia heavily rely on textile raw material inputs from China and contribute to the excess production capacity problem that has caused the U.S. trade deficit in textiles and apparel.
- Association of the Nonwoven Fabrics Industry, INDA (note: representing the North American nonwoven fabrics and engineered materials industry): Expressed concern that China’s nonwoven production increased by 5.1% in 2024, supported by “government policies including subsidized inputs, low-cost financing, and export promotion.” “Similar dynamics exist or have the potential to exist in other investigated economies (e.g., Vietnam, India, Bangladesh, Indonesia, Cambodia, and Thailand), where textile and nonwoven-related production benefits from export incentives, capacity additions untethered to market demand, and bilateral trade surpluses with the United States.”
Arguments that there is NO “structural excess capacity” problem in textiles and apparel
Industry associations representing U.S. fashion brands, retailers, and importers generally argue that the U.S. trade deficit in textiles and apparel and the high import volume should not be interpreted as the result of “excess capacity,” but rather as the natural outcome of each country’s comparative advantage in trade and today’s global apparel supply chain. Meanwhile, textile and apparel manufacturers from Asian countries argue that their export volumes reflect the sourcing decisions of U.S. fashion brands, not government-subsidized overproduction. Specifically:
- American Apparel and Footwear Association, AAFA (note: representing U.S. apparel brands and retailers): U.S. trade deficit in textiles and apparel is NOT an appropriate and relevant measurement of the excess production issue. Instead, “these trade flows reflect the organization of production within globally integrated supply chains, where capacity is developed and utilized in response to commercial sourcing decisions, long-term customer relationships, and evolving demand patterns. Production capacity in these sectors is generally responsive and mobile, and there is no indication of persistent or systemic underutilization of capacity maintained independent of market demand or sustained through policy intervention.”
- U.S. Fashion Industry Association, USFIA (note: representing U.S. fashion brands, retailers, and importers): Disagree that in the apparel sector “a country runs a trade surplus with the United States… it displaces existing U.S. domestic production or prevents investment and expansion in U.S. manufacturing production.” Instead, by applying the concept of comparative advantage, USFIA believes that “the cutting and sewing of apparel is the first rung on the ladder of industrial development, a rung the United States climbed long ago. As President Trump recently said: “They {China} can produce things that we don’t want to produce because it’s not really worth our while, making undergarments…. We don’t want to do that, and we can buy them inexpensively from other places in the world.” USFIA also pointed out that “Many countries, including notably the United States, often produce more than they can consume domestically and work to develop foreign markets to absorb that excess production. This is the very definition of international trade and is at the heart of the Trump Administration’s own efforts to dismantle foreign trade barriers.”
- Vietnam Textile and Apparel Association, VITAS (note: representing Vietnam textile and apparel manufacturers and exporters): First, “Viet Nam’s textile output is entirely demand-driven, manufactured against firm purchase orders from global brands. Output is manufactured exclusively against firm purchase orders placed by global brands and buyers.“ Second, Vietnam’s textile and apparel manufacturing sector remains profitable, so it continues to attract new foreign investment, indicating no overcapacity problem. In fact, 60% of Vietnam’s textile and apparel export revenues came from foreign-invested enterprises in the country. Third, the Vietnamese textile and garment industry depends heavily on imported raw materials for production; as such, it is unlikely to generate structural excess capacity. In particular, “the U.S. is currently the largest and most important supplier of cotton to Vietnam, accounting for nearly 50% of Vietnam’s total cotton imports.”
- Vietnam Cotton and Spinning Association, VCOSA (note: representing enterprises operating in the cotton and spinning industry in Vietnam): In Vietnam, “the cotton and spinning sector comprises about 180 enterprises, approximately 95% of which are privately owned or foreign-invested. In this context, decisions regarding capacity expansion, output levels, and investment are made independently by enterprises based on market signals, including market demand conditions, input costs and competitive pressures.” Similar to VITAS, VCOSA also argued that Vietnam’s cotton spinning industry relies heavily on imported raw cotton, including from the United States.
- Confederation of Indian Textile Industry: First, “the Indian Textile & Apparel (T&A) industry’s capacity expansion is closely aligned with domestic economic growth, market demand, and global trade dynamics, and is not driven by non-market interventions.” Second, India’s textile and apparel production “is stagnant or declining across the sector and value chain” due to competitions from countries like Vietnam and Bangladesh. Third, the Indian textile and apparel industry is “with a limited presence of large, vertically integrated players, capacity addition is inherently incremental, fragmented, and responsive to market signals, thereby preventing systemic overcapacity.”
- China Chamber of Commerce for Import and Export of Textiles, CCCT (note: representing China-based textile and apparel exporters): Claims that there is no excess capacity issue in China’s textile and apparel industry; however, no detailed data or evidence was provided to address concerns about China’s industrial policy and whether Chinese textile and apparel capacity has been expanded through state policy beyond what market demand would justify.
New Tariffs or Not?
Regarding whether USTR should impose additional tariffs as a result of the Section 301 investigation, textile and apparel industry associations also disagree, although the proposals were even more subtle.
First, U.S.-based textile manufacturers, including NCTO, generally support additional tariffs on finished textile and apparel products from Asia.
Second, U.S. fashion brands, retailers, and importers, including AAFA and USFIA, oppose imposing additional tariffs on textile and apparel imports, given 1) new tariffs are additional and unfair taxes on U.S. companies and consumers; 2) new tariffs will NOT bring back U.S. textile and apparel manufacturing, given the nature of the industry. AAFA also argues that existing mechanisms, such as the National Trade Estimate (NTE) report, should be the right tool to address USTR’s concerns, rather than using Section 301, which is supposed to be country-specific and very targeted.
Third, despite the general support for additional tariffs on finished goods, it is not uncommon for U.S. domestic textile and apparel manufacturers to request “tariff exclusions” for textile intermediates. For example:
- National Council of Textile Organizations, NCTO: “Exempt textile manufacturing inputs and machinery not available domestically from additional tariffs above existing MFN duties. American manufacturers need ready access to necessary manufacturing machinery and inputs not made domestically to maintain their global competitiveness against foreign producers who do not face similar tariffs.”
- Secondary Materials and Recycled Textiles Association, SMART: “In the wiping and cleaning sector, those tariffs have already had measurable and ongoing negative impacts that should be carefully considered before additional duties are imposed. Over the past several years, tariffs on textile inputs and finished wiping products have increased costs across the supply chain in ways that U.S. companies have largely been unable to avoid.”
- Association of the Nonwoven Fabrics Industry, INDA: “address the existing tariff imbalance by aligning the tariff treatment of nonwoven inputs (such as fibers) with that of finished nonwoven roll goods. This would eliminate the unintended cost disadvantage for domestic producers, encourage value-added manufacturing in the United States, and better support the objective of strengthening U.S. supply chain resilience.”
Fourth, there is a strong consensus among U.S. textile and apparel industry groups, including manufacturers, fashion brands, and retailers, against imposing additional U.S. import tariffs on textile and apparel products from the Western Hemisphere and in support of sourcing more apparel from the region.
- U.S. Fashion Industry Association, USFIA: “USFIA would like to highlight the importance of Western Hemisphere production for the entire textile and apparel supply chain…We support efforts to incentivize more sourcing from the Western Hemisphere.”
- National Council of Textile Organizations, NCTO: “Preserve critically important duty-free treatment for USMCA/CAFTA-DR qualified textiles and apparel. We urge the administration to preserve duty-free treatment for goods that qualify for preferential treatment under U.S. FTAs with Western Hemisphere countries, particularly the USMCA and the CAFTA-DR given the economic significance of these markets to U.S. textile manufacturers.”
- Association of the Nonwoven Fabrics Industry, INDA: “Coordinate with allied economies where appropriate and maintain exemptions or targeted approaches for partners (such as USMCA countries) that do not engage in the same distortive practices.”
Additional Assessment from an Academic View
In theory, “excess capacity” is very unlikely in the apparel sector, given the industry’s nature. In particular, apparel manufacturing has relatively low barriers to entry and exit, and workers can move in and out of the sector relatively easily. As a result, if excess capacity emerges, factories typically adjust by scaling back production or reducing employment. Meanwhile, the apparel industry is “buyer-driven,” meaning production decisions are largely based on demand from fashion brands and retailers rather than supply-side expansion by manufacturers. (See the shifting market share in the U.S. apparel import market by supplying countries)
On the other hand, claims of structural overcapacity in the textile and apparel sector are not well supported by evidence. In industries characterized by persistent excess capacity, such as steel or solar panels, the imbalance between supply and demand typically results in sustained price depression and large volumes of unsold industrial output. However, the global apparel markets have not experienced such systematic price collapses, and US apparel imports have become even more expensive, especially in 2025.
Additionally, higher U.S. tariffs on apparel imports are most likely to shift production rather than reduce it. For example, U.S. fashion companies may redirect sourcing to countries or regions with lower tariff rates. At the same time, exporting countries may divert shipments from the U.S. to alternative markets such as the EU, leaving global production capacity largely unchanged. Ironically, higher U.S. market prices driven by tariffs may “encourage” greater global production, as suppliers, including those in the U.S., expand output to capture a higher margin, thereby worsening the “excess capacity” problem.
by Sheng Lu
FASH455 Global Apparel & Textile Trade and Sourcing 
In class we talked about trade policy and how it directly affects souring costs, product availability, legal requirements, and market access for textile and apparel companies. It can also help shape new supply chains by affecting where companies choose to source. In this blog post, we see that trade policy is fully supported by the data because the Section 301 investigation could lead to more tariffs on textile and apparel imports. The blog also shows that US textile manufacturers pretty much support more tariffs while fashion brands and importers don’t want them because tariffs can raise the costs for their consumers. Going forward, I think fashion companies should pay close attention to US trade policy changes because in the future tariffs could affect their sourcing decisions and supply chain plans.
One concept from class that connects to this post is comparative advantage. We talked about how countries focus on producing goods where they’re more efficient, which is why apparel production is so global. This is especially true in a buyer driven industry like fashion, where brands care a lot about cost and flexibility.
In the blog, this helps explain why high US imports don’t automatically mean there’s “excess capacity.” Groups like USFIA argue that production is based on brand demand and sourcing decisions, not just overproduction. For example, Vietnam mainly produces apparel based on actual purchase orders, which shows it’s demand driven rather than just producing extra supply.
From a managerial perspective, this makes me think tariffs might not actually fix the issue. Brands would probably just shift sourcing to different countries instead. Furthermore, also makes me wonder if higher tariffs could end up strengthening other markets rather than reducing global production, which kind of almost defeats the purpose.
comparative advantage is not a key concept we learned in April/May
One key concept from our lecture is the Section 301 investigation, which is a trade tool used by the U.S. government to address foreign trade practices. In class, we discussed how this mechanism allows the U.S. to impose tariffs in order to protect domestic industries from things like government subsidies. In this blog post, the concept of Section 301 is applied through investigation into “structural excess capacity” across 16 countries. The data provided supports the investigation by showing how low capacity utilization rates are evidence that government interventions are propping up inefficient production. A major policy recommendation following this debate is to maintain the “yarn-forward” rule and duty-free status for USMCA and CAFTA-DR partners, even if new tariffs are imposed globally. One major takeaway here is that there’s a rare moment of agreement that the Western Hemisphere needs to stay exempt to keep the regional supply chain stable. If the government doesn’t play this right, they could accidentally harm the U.S. textile manufacturers who supply the raw materials for clothes finished in these nearby countries. It really shows that trade policy has to be very precise.
This blog post relates to two different topics that we discussed during class. One being a video we watched on Apparel Rules of Origin with Patrick Fox. Fox manages complexity and global trade compliance activities. Fox mentioned that sourcing decisions rely heavily on capacity, capability and duty/landed cost. In this blog post, Professor Lu mentions that U.S textile manufacturers argue that excess capacity is present within the industry and is driven by government subsidies. This correlates to Fox’s point in that if certain constraints consist of excess capacity through subsidies, they have the potential to offer lower production costs. This would ultimately influence sourcing decisions made by global brands. The second topic that relates to this blog post is on policy tariffs. In class we discussed why trade policy matters for textile and apparel. The reasons were that id affects sourcing and product availability, affects and shapes new supply chairs, affects legal requirements and affects market access. This relates to the blog because the debate over implementing additional tariffs highlights how policy decisions can directly impact where companies choose to source their products. As mentioned, there is a chance that tariffs may not reduce global production, but instead, change the location in which companies source their materials and products. In all, I believe this blog post opened me up to the idea of over sourcing and companies maintaining extra capacity. I think the post explains how brands work around this and how it can be a problem within the industry. One question I want to ask is how much do tariffs affect excess capacity and is the only solution to source from additional countries?
US-EU textile and apparel trade, which focuses on the comparatively open, high-standard trade relationship between the United States and the European Union, is one key concept from our class that connects to this blog article. We talked in class about how this relationship is crucial since it entails strong rules, comparatively reduced trade barriers, and an emphasis on sustainability and quality rather than just low-cost production. This idea is used in the blog post to explain why excess capacity is focused in less expensive manufacturing areas rather than in more developed markets like the US and the EU. The article emphasizes how overinvestment in export-oriented nations drives global overcapacity, whereas US-EU trade typically supports more stable and valuable output.
From a management standpoint, fashion brands would seek to move some of their sourcing to US-EU partners in order to lessen their exposure to volatility brought on by excess capacity in low-cost nations. However, there is a trade-off because sourcing from the US or the EU is frequently more expensive. Businesses need to strike a balance between long-term dependability, supply chain durability, and cost effectiveness. This also presents the crucial question of whether companies should focus on investing in more solid trade partnerships for the future or on short-term savings from oversupplied markets.
A course concept this blog post relates to is trade policy. Trade policy discusses the government’s choices, regarding tariffs, trade agreements, and subsidies, that impact the flow of international trade. These pieces can influence costs and production. This connects to the blog post because of the issue of excess capacity. The post explains that U.S. producers believe that excess capacity is not driven by market demand and instead is determined by foreign government subsidies and industrial policies. This connects to trade policy because these subsidies might keep the factories operating even with a low demand but not to their full capacity. A recommendation I would give is that governments need to improve their overall transparency, especially around subsidies in this situation. This would hopefully reduce trade disputes and explain whether the problems surrounding excess capacity are market or policy driven. In the case that excess capacity is policy driven, should there be more strict rules about global trade or would that interrupt affordable fashion supply chains?
During class we have discussed the USMCA and CAFTA-DR free trade agreements that help and set rules for economic and trade interactions of the supply chain the Western Hemisphere. In this system we went over how thee U.S sends yarns to countries such as Mexico in order for it to be developed into textiles there. This blog post demonstrates the regional partnership that and shows data to support it. For instance the U.S manufacturers such as the NCTO and fashion brands within the USFIA value the duty-free aspect of the agreement as it incentivizes sourcing from the Western Hemisphere and is of great economic significance to them and that it should remain in order to stay competitive against Asia. This helps to go deeper as to why there is limited support for new tariffs on regional partners, it would worsen the progress of nearshoring that has been created. In the future I would hope to learn if the system will continue as the U.S tariff and trade policies continue to grow in rules and become stricter to foreign countries. Fashion companies may even want to move production into areas within the USMCA and CAFTA-DR trade agreement region in order to avoid the increased tariffs growing in Asia’s production areas.
One key concept from our class that relates to this blog post is comparative advantage. In class, we learned that comparative advantage explains how countries specialize in producing goods they can make more efficiently, which drives global trade patterns and sourcing decisions in the apparel industry. In this post, comparative advantage helps explain why many industry groups, like the American Apparel and Footwear Association (AAFA) and U.S. Fashion Industry Association (USFIA), argue that high import levels are not evidence of excess capacity. Instead, production is located in countries like Vietnam or Bangladesh because they have lower labor costs and established supply chains. The post also shows that apparel production is demand-driven, meaning factories produce based on orders from brands, not just to fill unused capacity. From a managerial perspective, this suggests that additional U.S. tariffs may not solve the issue but instead shift sourcing to other countries. Fashion companies should focus on diversifying supply chains rather than relying on protectionist policies. I am curious whether continued tariff increases could actually make global production less efficient overall, rather than reducing capacity.
One key concept from our class that relates to this blog post is the “Flying Geese” model of industrial development. In class, we discussed how production in labor intensive industries like textiles and apparel often shifts from higher cost countries to lower cost countries as wages rise and comparative advantages change. This concept helps explain why global sourcing patterns constantly evolve and why some countries struggle with excess production capacity over time. In this blog post, the discussion about structural excess capacity in the textile and apparel industries reflects these shifts in global production. Countries such as China built enormous manufacturing capacity during periods of rapid export growth, but slowing demand and rising labor costs are now creating pressure on factories and suppliers. The post also highlights how weaker consumer spending and overinvestment in manufacturing have intensified competition among suppliers. The Flying Geese model helps explain why production is increasingly moving toward countries like Bangladesh and Vietnam, while older manufacturing factories face declining utilization rates. Going forward, fashion companies may need to focus more on flexible sourcing strategies instead of relying heavily on one production region. Overcapacity could lead to lower prices in the short term, but it may also increase financial instability for suppliers and create risks for brands that depend on them. I also think policymakers should consider how to balance industrial growth with realistic long-term demand projections, since expanding factory capacity too aggressively can eventually hurt both workers and manufacturers.
One key concept from our class that relates to this blog post is the flying geese model. This is important because it explains how industries shift from more developed countries to developing countries as labor costs and economic conditions change. In class, we’ve discussed the issues regarding balancing labor costs while still maintaining a strong importing channel. In the blog post we can see why the Flying Geese Model helps explain why the U.S. imports large amounts of apparel rather than producing it domestically. It explains that apparel manufacturing is no longer a major comparative advantage for the United States because production has naturally shifted to countries with lower labor costs and growing production. Going forward, I am curious whether tariffs introduced could disrupt the progression of manufacturing of the Flying Geese Model. Fashion companies may lean to sourcing across multiple developing countries/regions due to this issue in order to reduce risk and make their supply chains more stable and flexible.
One concept from class is the “Flying Geese Model,” which explains how Asian countries form a regional textile and apparel supply chain based on different levels of economic development. More advanced countries often supply capital, machinery, yarn, and fabric, while less developed countries focus on labor-intensive apparel assembly. This creates a connected regional production network called “Factory Asia.” This concept helps explain why tariffs did not significantly bring textile and apparel production back to the United States. The article showed that many U.S. companies shifted sourcing within Asia rather than reshoring production. Countries like Vietnam, Bangladesh, and Cambodia increased exports to the U.S. because they already have strong apparel manufacturing capacity and are supported by Chinese investment and textile inputs. The article also noted that more than 72% of U.S. apparel imports still came from Asia in 2025, showing how deeply connected and established the Asian supply chain remains. A managerial implication is that fashion companies will likely continue relying on Asia because the regional supply chain is efficient and difficult to replace quickly. However, rising geopolitical tensions and tariff uncertainty may encourage brands to diversify sourcing into the Western Hemisphere through agreements like USMCA and CAFTA-DR to reduce future supply chain risk.
In class we discussed how trade policy plays a major role in shaping the textile and apparel industry, influencing everything from sourcing costs and market access to where companies decide to manufacture their products. The blog post is a good real shows how potential new tariffs could seriously impact import costs and force companies to rethink their supply chains. It also highlights how differently stakeholders feel about tariffs depending on where they sit in the supply chain, with U.S. textile manufacturers generally in favor of them while fashion brands and importers push back because higher tariffs ultimately get passed down to the consumer. This is something fashion companies really need to stay on top of because any shift in trade policy can quickly change which sourcing destinations make the most financial sense, and companies that are not paying attention could find themselves scrambling to adjust their supply chain strategies at the last minute.
A key concept from out class that relates to this blog post is comparative advantage. We learned that comparative advantage explains why countries in producing goods they can make more efficiently than other countries. In this blog post, comparative advantage helps explain why groups like AADA and USDIA argue that high U.S. apparel imports should not automatically be seen as “structural excess capacity”. This blog explains that production in countries like Vietnam, Bangladesh, and India is often driven by purchase orders from global brands rather than factories producing excess goods with no demands. Fashion companies should be careful about relying too heavily on tariffs as a solution because tariffs may not bring production back to the U.S. but push more brands to soruce in lower-tariff countries.
One concept that connects to this article is the Flying Geese Model. The flying geese model explains that more advanced economies handle capital-intensive textile production, while less advanced economies focus on less intensive assembly, forming an interconnected supply chain. This model is reflected in the dynamic regional division of labor in Asia.
This model helps explain why higher U.S. tariffs are more likely to shift production than reduce it. Countries such as Vietnam, Bangladesh, and Cambodia rely on yarn and fabric supplied by Tier 3 economies, such as China and India. This demonstrates that the regional supply chain would absorb tariff pressure rather than fall apart.VITAS supports this by noting that 60 percent of Vietnam’s textile and apparel export revenues came from foreign-invested enterprises, reinforcing the deep integration of this regional network.
To respond to these pressures, fashion firms need to recognize that sourcing decisions cannot be detached from this connected regional structure. As Factory Asia continues to be vertically integrated across multiple tiers, diversifying the supply chain away from the region entirely is not a realistic option, making Western Hemisphere investment and policy incentives more critical for building an alternative supply chain.
Brinkley, I agree with your point, and the Flying Geese Model really backs it up. The article shows that even with tariffs, production didn’t return to the U.S., it just shifted within Asia’s integrated supply chain. Countries like Vietnam and Bangladesh rely heavily on inputs from China and India, so the region absorbs tariff pressure instead of losing competitiveness. VITAS noting that 60% of Vietnam’s exports come from foreign‑invested firms shows how deeply connected Factory Asia is. Because of this structure, tariffs can’t break the regional network. They just push sourcing from one Asian country to another, which is why Western Hemisphere investment and stronger incentives matter more than tariff hikes.
A key course concept that relates to what we have learned in class this month is the flying geese model. The flying geese model explains that labor intensive industries, such as textiles and apparel, gradually shift from advanced economies to developing countries as wages rise, and production costs increase. Countries move up the value chain over time while developing economies take lower cost manufacturing production. The article demonstrates this concept through the argument from organizations, such as the American Apparel and Footwear Association (AAFA) and U.S. Fashion Industry Association (USFIA), that apparel production has naturally shifted from the US to countries like Cambodia, Vietnam, and Bangladesh because these economies have a comparative advantage in labor intensive manufacturing. The flying geese model also applies to production from Vietnam and India that follows global brand sourcing decisions and foreign investment. The increase in textile production in developing countries reflects the normal evolution of global supply chains and the flying geese model. A question that can continue this discussion is, could U.S. trade policy realistically reverse long-term industrial migration patterns explained by the flying geese model?
One key concept from our class that relates to this blog post is nearshoring and regional supply chains. In class, we discussed how companies are increasingly moving parts of their production closer to their main consumer markets in order to reduce shipping times, improve reliability, and avoid trade risks.
The article supports that idea because many U.S. textile and apparel groups emphasized the importance of sourcing from Western Hemisphere countries through agreements like USMCA and CAFTA-DR. It explains that both manufacturers and fashion brands support preserving duty-free treatment for countries in the region because it helps strengthen supply chain resilience and keeps sourcing competitive against Asia. It also shows that companies are not only focused on the cheapest labor costs anymore, but are beginning to consider factors such as speed, flexibility, and trade stability when making sourcing decisions. The concerns surrounding new Section 301 tariffs further demonstrate why companies value regional partnerships that offer more predictable trade conditions.
I believe fashion companies may continue increasing production in Mexico and Central America to reduce dependence on Asian suppliers and avoid future tariff uncertainty. Nearshoring has the potential to eventually become more important than purely chasing the lowest production costs.
An idea from class that relates to the blog post is the Flying Geese Model – whether the overcapacity in countries like China is a normal result of the model, or if the countries are receiving subsidies to underutilize their capacity and keep prices artificially high. If done naturally, the Flying Geese Model demonstrates the way countries with advanced economies move out of lower-paying sectors (ex: apparel manufacturing), allowing for economically less-advanced countries to replace it.
Although CCCT claims that there is no overcapacity in China’s textile and apparel industry, there is no data to support this. If the claim is true, it means China’s underproduction is due to their technological/economic advancement. This leads to the question: why was China’s textile filament production utilization only at 75%? In 2026?
In conclusion, the article raised good skepticism towards the excess capacity and underutilization within the manufacturing sector. However, countries like China have a long history of providing government subsidies, giving reason to their technological advancement and allowing them to leave low-wage industries. There can be a variety of factors for countries underutilizing, and government intervention may not be a major part of it. I believe in order to come to a definite answer, further investigation needs to be done.
A relevant course concept to this blog post is oversupply. In class, this meant that when too many producers stay in the market, prices fell, profits shrunk, and weaker firms should eventually exit unless something kept that capacity in place. In this blog post, that idea is challenged in the apparel industry because high apparel imports do not automatically prove oversupply or structural excess capacity. USTR defines it as capacity “sustained over a prolonged period due to government intervention,” but AAFA argues apparel is “buyer-driven” and based on “globally integrated supply chains,” while USFIA says apparel production is the “first rung on the ladder of industrial development.” This shows that excess capacity is an issue that would more likely affect textiles than apparel. Going foward, problems could arise if contradicting definitions and viewpoints as to the origin of excess capacity lead to misdirected tariffs or unhelpful trade restrictions.
I don’t think there is strong evidence of a true “structural excess capacity” problem in the textile and apparel industry, and I also don’t think tariffs are the right solution. The concept of comparative advantage helps explain this, since countries specialize in producing goods they can make most efficiently. That’s why apparel production is concentrated in lower-cost countries rather than the US. The article points out that apparel manufacturing is “buyer-driven,” meaning production is based on demand from brands, not excess supply. It also mentions that global apparel prices have not collapsed, which we would expect if there were a real overcapacity issue. Instead, US imports have actually become more expensive, suggesting demand is still strong. Additionally, companies in countries like Vietnam produce based on firm purchase orders, not government-driven overproduction. Overall, tariffs seem more likely to shift sourcing rather than fix any underlying issue. Companies would just move production to other countries with lower tariffs, leaving global capacity mostly unchanged. A more effective approach would be working with the Western Hemisphere through trade agreements to build stronger, more efficient supply chains.
One course concept that relates to this blog post is the Flying Geese Model. The Flying Geese Model explains how more advanced economies undertake more capital/technology-intensive production processes in the textile complex. This creates regional supply chains where countries specialize in different stages of production. This concept helps explain why many industry groups in the post argue that current textile and apparel trade patterns are demand-driven rather than because of “structural excess capacity”. For example, Vietnam imports textile inputs from China and exports finished apparel to the U.S., reflecting a regional supply chain structure rather than overproduction. The post also notes that apparel manufacturing is highly flexible and buyer-driven, meaning brands and retailers largely determine production levels through sourcing decisions. A key implication is that higher U.S. tariffs may not reduce global apparel production, but instead just shift sourcing to other countries following the Flying Geese Model. Fashion companies will likely continue relocating production to lower-cost regions rather than trying to bring large-scale manufacturing back to the United States because it is very costly and time-consuming.
This specific blog post relates to the Flying Geese Model because it is a reflection of how textile and apparel production moves between countries depending on their level of economic development and production costs. The model shows how more advanced countries usually move away from lower paying, labor extensive industries like apparel manufacturing, while developing countries take over those jobs because they can produce goods at a lower cost. The article gives examples of this through global supply chains, such as Vietnam importing textile materials from China and then exporting finished clothing to the United States.
The post also explains that apparel production is very buyer driven, meaning brands and retailers decide where products are made based on cost, demand, and efficiency. This means that even if the U.S. raises tariffs, companies will probably just diversify and move sourcing to other low cost countries instead of bringing manufacturing back to America. I do think it is interesting to question China’s unused production capacity and whether it is a natural part of the Flying Geese Model or more influenced by the government. Overall, I think the post showed the complexity of global apparel sourcing, especially in such a volatile time for trade agreements.
One key concept from our class that relates to this blog post is the flying geese model. In class, we’ve discussed that the flying geese model is how companies move from more developed countries to less developed countries as the economy grows. In the blog article the current global textile and apparel production continues to shift toward lower- cost countries in Asia rather then returning to the US. This can also be seen with the growth of apparel in countries like Vietnam, Bangladesh, Cambodia, and India after production previously moved from countries like Japan, South Korea, Taiwan, and China. I am curious if this pattern continues if quality with decrease for companies and if people will still want ot be buying from them.
Based on our class discussion, a concept relevant to this post is regional trade agreements, specifically the USMCA and CAFTA-DR. We discussed how these agreements can encourage regional sourcing by giving qualifying textile and apparel products duty-free or preferential treatment, often through yarn forward rules of origin. In this post, USMCA and CAFTA-DR support the ideas of why many groups oppose applying new tariffs to Western Hemisphere trade partners. Even though U.S. textile manufacturers support stronger action against Asian apparel imports, the post notes that groups across the industry support preserving duty-free treatment for qualifying goods from USMCA countries. Showing that trade policy is not only about restricting imports, but also about encouraging supply chains that support U.S. yarn, fabric, and regional apparel production.Going forward, I think fashion companies may want to strengthen sourcing relationships in the Western Hemisphere. If tariffs increase on Asian suppliers, CAFTA-DR and USMCA could become more valuable for balancing lower duty costs, shorter lead times, and supply chain resilience.