The latest US apparel import data raises several puzzles that deserve to be investigated further.
Question 1: Why did imports suddenly surge, and is this surge sustainable?
Unexpectedly, US apparel imports experienced a significant surge in February 2024. This surge was marked by a 12.9% increase in quantity and a 2.9% increase in value compared to the previous year. Seasonally adjusted US apparel imports in February 2024 were also nearly 10% higher than in January 2024. The import surge was particularly surprising given that the value of US clothing sales in February 2024 was only 1.3% higher than a year ago and even 0.5% lower than in January 2024 (seasonally adjusted).
Therefore, it will be important to watch whether the US apparel trade has indeed reached a turning point and will continue growing in the coming months and throughout the year.
Question 2: Could the volume of US apparel imports in 2023 have been underreported?
With over 98% of clothing sold in the US retail market being imported today, there exists a strong correlation between US apparel retail sales (NAICS code 4481) and the volume of apparel imports. Between 2015 and 2022, the US clothing sales to clothing import ratio remained consistently around 3.0-3.2 (seasonally adjusted). In other words, the value of retail sales was approximately three times the value of apparel imports. However, in 2023, this ratio increased to 4.0-4.5.
One suspicion is that as more apparel imports came into the US through the de minimis, the official US apparel import data in 2023 was somewhat underreported. Notably, according to Euromonitor, about 40% of US apparel retail sales were achieved through e-commerce in 2023, a substantial increase from 9.4% in 2010. Likewise, with US customs tightening controls on “small package shipments” and enhancing UFLPA enforcement, more imports likely began entering through the standard procedure in recent months, which explains why the US apparel sales to import rato fell back to 3.8 in February 2024.
On the other hand, some say the lowered US apparel import volume in 2023 was due to retailers’ efforts to control inventory levels. Data shows that US clothing stores’ stock-to-sales ratio in the last quarter of 2023 averaged 2.34, slightly lower than 2.43 from 2015 to 2019, but was higher than 2.19 back in 2021. In other words, while there was some effort by retailers to control inventory (as seen by the ratio being lower than pre-pandemic levels), it wasn’t a significant enough change to have a large impact on import demand. Also, considering that apparel is a seasonal product, it doesn’t seem too likely that retailers would risk losing sales opportunities during the most critical selling season of the year (i.e., 4th quarter) by promoting outdated items instead of stocking new ones on the shelf.
Question 3: Why did Asian countries export more apparel to Mexico?
As a developing country, Mexico is not traditionally a leading apparel import market due to consumers’ limited purchasing power and the sufficient local apparel supply. Take China, Vietnam, Bangladesh, and Cambodia, the four top Asian apparel exporting countries (Asia4), for instance. Between 2018 and 2020, Mexico typically accounted for 0.4%-0.7% of Asia4’s total apparel exports. However, since 2022, Asia4 has almost doubled its apparel exports to Mexico (i.e., increased to 1.5%-2.0%). Moreover, during the same period, the percentage of Asia4’s apparel exports to the United States declined from 27% to below 20%, especially in the last quarter of 2023.
What’s behind the increase in Asian countries’ apparel exports to Mexico needs to be investigated further. As noted earlier, Mexico itself is a leading apparel-producing country. Also, according to Euromonitor, the clothing market in Mexico stayed relatively stable at around 7.6%-7.9% of the size of the US from 2017 to 2023 (in quantity). In other words, Mexico’s increased import demand for Asian clothing doesn’t make much sense.
Others suspect some Asian apparel exports to Mexico eventually entered the US market either by taking advantage of the de minimis rule or the US-Mexico-Canda (USMCA) trade agreement. However, the exact size of this particular trade flow calls for further investigation.
First, affected by the macro economy, US apparel import volume in 2023 suffered the most significant decline since the pandemic. Specifically, US apparel imports decreased by 22% in quantity and value in 2023 compared to 2022, with none of the top ten suppliers experiencing positive growth.
Nevertheless, after several months of straight decline, US apparel imports finally bounced back in December 2023. Thanks to the holiday season and a gradual improvement of the US economy, seasonally adjusted US apparel imports in December 2023 were about 4.5% higher in quantity and 4.2% higher in value than the previous month. Highly consistent with trends, the US Consumer Confidence Index (CCI) increased from 67.2 in November to 76.4 in December (January 2019=100), suggesting US households turned more confident about their financial outlook and willing to spend. That being said, the latest January 2024 International Monetary Fund (IMF) forecasts still predicted the US GDP growth would slow down from 2.5% in 2023 to 2.1% in 2024. Thus, whether the US apparel import volume could continue to maintain growth after the holiday season remains a big question mark.
Second, while the pace of sourcing cost increases has slowed, the costs and financial pressure facing US fashion companies are far from over. Specifically, as of December 2023, the price index of US apparel imports stood at 106 (January 2019=100), almost no change from January 2023. However, two emerging trends are worth watching. One is the declining US apparel retail price index since August 2023, which means US fashion companies may have to sacrifice their profits to attract consumers to the store. The second trend is the surging shipping costs as a result of the recent Red Sea shipping crisis, which were not reflected in the December price data. According to J.P. Morgan, during the week of January 25, 2024, the container shipping rates from China to the US West Coast and East Coast saw a significant spike of around 140% and 120% from November 2023, respectively. Even worse, there is no sign that the Red Sea crisis will soon be solved. Therefore, 2024 could pose another year of financial challenges for many US fashion companies.
Third, diversification remained a pivotal trend in US fashion companies’ sourcing strategy in 2023. For example, the Herfindahl–Hirschman index (HHI), a commonly used measurement of market concentration, went down from 0.105 in 2022 to 0.101 in 2022, suggesting that US apparel imports came from even more diverse sources.
Notably, measured in value, only 71.6% of US apparel imports came from Asia in 2023, the lowest in five years. Highly consistent with the US Fashion Industry Association’s Benchmarking Survey results, OTEXA’s data reflected companies’ intention to diversify their sourcing away from Asia due to increasing geopolitical concerns, particularly the rising US-China strategic competition.
However, it should be noted that Asia’s reduced market share did not benefit “near-shoring” from the Western hemisphere much. For example, in 2023, approximately 14.6% of US apparel imports originated from USMCA and CAFTA-DR members, nearly the same as the 14.3% recorded in 2022. Instead, US apparel imports outside Asia and the Western Hemisphere jumped to 11.4% in 2023 from 9.8% a year ago. Some emerging EU and African suppliers, such as Turkey, Romania, Morocco, and Tunisia, performed relatively well in the US market in 2023, although their market shares remained small. We could highly expect the sourcing diversification strategy to continue in 2024 as many companies regard the strategy as the most effective to mitigate various market uncertainties and sourcing risks.
Fourth, US fashion companies continued reducing their China exposure as much as possible, but China will remain a key player in the game. On the one hand, about 20.0% of US apparel imports in value and 25.9% in quantity came from China in 2023, both hit a new low in the past decade. Recent studies also show that it became increasingly common for China to no longer be the largest source of apparel imports for many US fashion companies.
However, China remains highly competitive in terms of the variety of products it offers. For example, the export product diversification index, calculated based on trade data at the 6-digit HTS code level (Chapters 61 and 62), shows that few other countries can match China’s product variety. Likewise, product level data collected from industry sources indicates that China offered far more clothing styles (measured in Stock Keeping Units, SKUs) than its competitors in 2023. According to the results, rather than identifying 1-2 specific “next China,” US fashion companies appeared to leverage “category killers”—for example, utilizing Vietnam as a sourcing base for outerwear, underwear, and swimwear; India for dresses, and Bangladesh for large-volume basic knitwear items.
Related to this, another recent study found that the top five largest Asian suppliers next to China, including Vietnam, Bangladesh, Indonesia, India, and Cambodia, collectively can offer diverse product categories almost comparable to those from China in the US market.
Fifth, trade data reveals early signs that US fashion companies are gradually reducing sourcing cotton apparel products from Asia because of the implementation of the Uyghur Forced Labor Prevention Act (UFLPA). Notably, when concerns about cotton made by Xinjiang forced labor initially emerged in 2018, US fashion companies quickly shifted sourcing orders for cotton apparel (OTEXA code 31) from China to other Asian countries. However, UFLPA’s enforcement increasingly targets imports from Asian countries other than China due to the highly integrated regional textile and apparel supply chain and Asian countries’ heavy reliance on textile inputs from China. Consequently, Asia (excluding China) accounted for a declining share in the total imports of US cotton apparel in 2023.
Meanwhile, affected by UFLPA’s enforcement, only 11.8% of US cotton apparel imports came from China in 2023, marking a further decline from 13% in 2022 and reaching a new low for the past decade. China also deliberately decreased the percentage of cotton apparel in its total apparel exports to the US market, dropping from nearly 40% in 2017 to only 25% in 2023. In comparison, cotton apparel consistently represented about 45% of total US apparel imports during the same period.
Additionally, while there was no substantial increase in the volume of US apparel imports from CAFTA-DR members, as a silver lining, the utilization of the trade agreement improved. In 2023, about 19.2% of US apparel imports claimed duty-free benefits under US free trade agreements and trade preference programs, a notable increase from 17.7% in 2022. Most such imports came under CAFTA-DR (45.4%) and USMCA (19.7%).
Meanwhile, in the first 12 months of 2023 (latest OTEXA data), about 70.2% of US apparel imports came from CAFTA-DR members claimed the duty-free benefit, up from 66.6% the same period a year ago. Particularly, 65.4% of US apparel imports under CAFTA-DR complied with the yarn-forward rules of origin in 2023, a notable increase from 61.3% in 2022. Another 2.6% of imports utilized the agreement’s short supply mechanism, which also went up from 2.3% in 2022. The results could reflect an ever more integrated regional textile and apparel supply chain among CAFTA-DR members due to increasing investments made in the region in recent years. However, there is still much that needs to be done to effectively increase the volume of US apparel imports from the region.
The full article is here(Just-Style access required). Below are the key findings:
Based on a content analysis of the annual reports of about 30 largest US fashion brands and retailers from 2018 to 2023, this study aims to identify these companies’ most critical evolving sourcing practices, including their sourcing destination adjustment, primary sourcing factors, and emerging sourcing-related “hot topics.” The findings provide critical market intelligence, informing US fashion companies about their peers’ emerging sourcing trends and popular practices. The results show that:
First, maintaining a relatively diverse sourcing base remains common among US fashion companies. Results show that large-size companies today typically source from more than 20 countries. One critical factor behind fashion companies’ sourcing diversification strategies is that no single supplying country is “perfect,” given the increasingly complex sourcing factors. Sourcing diversification allows fashion companies to balance various sourcing factors. For example, according to company #19, “the (sourcing diversification) approach provides us with the greatest flexibility in identifying the appropriate manufacturers while considering quality, cost, timing of product delivery and other criteria.” On the other hand, sourcing diversification enables companies to adapt quickly to market uncertainties and enjoy supply chain flexibility and resilience.
Second, while US fashion companies are not necessarily leaving any particular countries they source from, many have substantially reduced the number of vendors they work with over the past few years. Specifically, out of the 30 fashion companies the study examined, over 60% explicitly mentioned they consolidated their sourcing base at the vendor level from 2017/2018 to 2022/2023, although the degree varied. For example:
Company #4, a leading sportswear brand, cut its contracted factories from 363 to 291 (or down 19.8%)
Company #6, which owns several jeans and sportswear brands, reduced its contracted factories from 1,000 to around 340 (or down 66%)
Company #9, a well-known specialty clothing store, cut its vendors from 800 to 250 (or down 68.8%)
Company #26, a specialty clothing store targeting the youth, cut its vendors from 150 to around 119 (or down 20.7%)
Company #28, a discount department store, cut its vendors from 3,100 to around 2,800 (or down 9.7%)
Associated with the trend of “country diversification and vendor consolidation,” US fashion companies are increasingly interested in working with “super vendors,” e.g., those with multiple country presence or vertical manufacturing capability. The use of “super vendor” can also be observed in fashion companies’ willingness to give more sourcing orders to their top suppliers. For example, Company #18, a casual and outdoor wear retailer, reduced its vendors from 200 in 2017/2018 to 110 in 2022/2023, but increased the cap of sourcing orders for its top 10 vendors from 40% to 47% over the same period.
Third, regarding the sourcing base, many US fashion companies have intentionally reduced their apparel sourcing from China, given the US-China tariff war, deteriorating bilateral relations, and the forced labor concerns with China’s Xinjiang region (XUAR). Specifically, more than one-third of the examined companies explicitly mentioned their strategy to reduce finished garments sourcing from China. Furthermore, several US fashion companies indicated their “reducing China exposure” strategy would continue, implying China’s market share in the US apparel import market could decrease further.
Nevertheless, even though fewer finished garments are coming from China, US fashion companies admit that China will continue to play a critical role as a textile raw material supplier as no immediate practical alternative is available. For example, Company #20, a specialty clothing chain focusing on trendy and fashionable items, says, “During fiscal 2022, we sourced most of our finished products with partners and suppliers outside the US and we continued to design and purchase fabrics globally, with most coming from China.”
Fourth, in line with trade statistics, US fashion companies consider other Asian suppliers, such as Vietnam, Bangladesh, Cambodia, and Indonesia, as their top choices as China’s alternatives.In comparison, few fashion companies explicitly mentioned moving their sourcing orders from China to Western Hemisphere countries or other regions.
Additionally, regarding emerging “hot topics” related to sourcing:
Geopolitics: the deteriorating US-China relations, escalated trade tensions expanded from tariffs to forced labor, and the potential trade disruptions have concerned US fashion companies significantly. Notably, US fashion companies regard sourcing from China as increasingly risky, with the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022. For example, according to Company 2, “The Uyghur Forced Labor Prevention Act and other similar legislation may lead to greater supply chain compliance costs and delays to us and to our vendors.”
Near-shoring: due to the decoupling and de-risking from the China movement, US fashion companies have begun actively exploring near-shoring sourcing opportunities in the Western Hemisphere, particularly from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). For example, Company #1, the North American manufacturer, disclosed that “(our) Company relies on a number of preferential trade programs (…) including the Dominican Republic – Central America – United States Free Trade Agreement (CAFTA-DR (…) Collectively, these agreements strengthen US economic relations and expand trade with Central America, the Dominican Republic, and Haiti.”
Sustainability and social responsibility: It is noteworthy that aside from climate change and forced labor, which are typically addressed as risk factors, US fashion companies generally hold an optimistic and forward-looking perspective for sustainability, such as new technologies and endeavors toward more sustainable production and sourcing. Terms such as using preferred or recycled materials, supply chain transparency and traceability, and emerging sustainability technologies have been more frequently mentioned in companies’ annual or ESG reports. For example, Company #17 says, “Increase the usage of environmentally preferred materials to comprise 32.6% of the brand’s global materials footprint.”Company #2 adds, “Our goal is to use preferred materials in 100 percent of our products by 2030.” Company #9 states, “We collaborate with suppliers to increase the supply of preferred raw materials.”
Supply chain transparency: US fashion companies attach great importance to improving supply chain transparency and traceability. Compared to the past, fashion companies are more willing to invest in new technologies and digital tools, allowing them to map supply chains and achieve sustainability goals more effectively. Related to this, US fashion companies have actively engaged with industry associations and other industry communities outside the company to stay informed about sustainability trends and learn best practices.
First, while US apparel imports gradually recovered, the import demand remained weak overall. For example, US apparel imports in July 2023 increased by 0.9% in value and 2% in quantity from June (seasonally adjusted). However, the trade volume still experienced a decrease of approximately 17-18% compared to the previous year. Meanwhile, the US consumer confidence index fell again in August 2023, suggesting the economic uncertainties are far from over. Notably, so far in 2023 (January to July), US apparel imports decreased by 22.3% in value and 28% in quantity from the previous year, the worst performance since the pandemic.
As a silver lining, the price of US apparel imports has stabilized, although inflation remains an issue for the US economy.
Secondly, because of the seasonal pattern, Asian countries were able to capture relatively higher market shares since June. For example, measured in value, China, ASEAN, and Bangladesh accounted for over 64% of total US apparel imports in July 2023, a notable increase from 61% in June and 58% in May 2023.
Nevertheless, US fashion companies continue diversifying their sourcing base to mitigate various supply chain risks and rising geopolitical tensions. For example, the HHI Index for US apparel imports dropped to 0.097 in the first seven months of 2023, which is lower than the 0.106 recorded in the same period the previous year (January to July 2022), indicating a greater diversity in the sources of imports.
Third, despite an apparent rebound in exports to the US, China continued to experience a further decline in its market share. For instance, in July 2023, China’s market share was more than 3 percentage points lower in value (27.2% in July 2022 vs. 24.1% in July 2023) and 2.5 percentage points lower in quantity (43.1% in July 2022 vs. 40.6% in July 2023). This marked the worst performance since April 2023. In other words, consistent with recent industry surveys, US fashion companies continue to reduce their China exposure given the adverse business environment.
Fourth, the latest data suggests that US apparel imports from CAFTA-DR members remain stagnant, and some critical problems, such as the underutilization of the agreement, even worsened. For example, about 9.5% of US apparel imports in value and 8.5% in quantity came from CAFTA-DR members in July 2023, lower than 10.2% and 9.0% in the previous year (i.e., July 2022). In absolute terms, US apparel imports from CAFTA-DR in 2023 were about 20% lower than in 2022.
Additionally, CAFTA-DR’s utilization rate (i.e., the value of imports claiming the duty-free benefits under CAFTA-DR divided by the total value of imports from CAFTA-DR) fell from 70.2% in 2022 (Jan to July) to a new low of 69.2% in 2023 (Jan to July). Likewise, the value of imports utilizing CAFTA-DR’s short supply decreased by more than 20%. Thus, how to leverage CAFTA-DR to meaningfully encourage more US apparel imports from the region, particularly in light of US fashion companies’ eagerness to reduce their exposure to China, calls for sustained efforts and probably new strategies.
According to Primark, it does not own any factories but sources all apparel products from contracted factories. Any contracted factory that manufactures products for Primark must meet internationally recognized standards before receiving the first sourcing order.
As of October 2022, Primark sourced from 883 contracted factories in 26 countries (note: it was a slight decline from 928 contracted factories in 28 countries as of May 2021). Of these factories, 85.5 percent were Asia-based because of the region’s massive production capacity and a balanced offer of various sourcing factors, from cost, speed to market, and flexibility to compliance risks.
Like many other EU-based fashion companies, near-shoring from within the EU was another critical feature of Primark’s sourcing strategies. About 14 percent of Primark’s contracted garment factories were EU-based (including Turkey).
Measured by the number of workers, Primark’s Asian factories were larger than their counterparts in other parts of the world. For example, while Primark’s factories in Pakistan and Bangladesh typically have more than 2,500+ workers, its factories in Western EU countries like the UK, Germany, Italy, and France, on average, only have 64-200 workers. This pattern suggests that Primark mainly uses Asian factories to fulfill volume sourcing orders, and its EU factories mainly produce replenishment or more time-sensitive fashionable items.
Meanwhile, similar to the case of other retailers like PVH, Primark’s contracted garment factories in China were smaller than their peers in the rest of Asia. For instance, while over 90% of Primark’s garment factories in Bangladesh employ more than 1,000 workers, around 43% of their contracted factories in China have fewer than 100 workers. This pattern suggests Primark could use China as an apparel sourcing base primarily for orders requiring greater flexibility and agility and those involving a wider variety of products but in smaller quantities.
Further, reflecting the unique role of the garment industry in creating economic opportunities for women, females account for more than half of the workforce in most garment factories that make apparel for Primark. The percentage was exceptionally high in developing countries like Tunisia (94%), Morocco (91%), Pakistan (69%), Sri Lanka (69%), Myanmar (64%), India (62%), and Vietnam (59%).
According to Primark (as of September 2023), its Ethical Trade and Environmental Sustainability team comprises over 120 specialists based in key sourcing countries. The team conducts around 3,000 supplier audits a year to monitor compliance (i.e., fair pay, safety, and healthy working conditions.) Additionally, Primark says its factories were in line with the company’s environmental code of conduct, and the company “donated any unsold merchandise to the Newlife Foundation in Europe and KIDS/Fashion Delivers in the US.
by Sheng Lu
Discussion questions:
What are the unique aspects of Primark’s apparel sourcing strategies? What role does sourcing play in supporting Primark’s business success? Any questions or suggestions for Primark regarding its sourcing practices?
This article comprehensively reviewed the world textiles and clothing trade patterns in 2022 based on the newly released World Trade Organization Statistical Review 2023 and data from the United Nations (UNComtrade). Affected by the slowing world economy and fashion companies’ evolving sourcing strategies in response to the rising geopolitical tensions, mainly linked to China, the world’s textiles and clothing trade in 2022 displayed several notable patterns different from the past.
Pattern #1: The expansion of world clothing exports witnessed a notable deceleration in 2022, primarily attributed to the economic downturn. Meanwhile, the world’s textile exports decreased from the previous year, affected by the reduced demand for textile raw materials used to produce personal protective equipment (PPE) as the pandemic waned.
The world’sclothing exports totaled $576 billion in 2022, up 5 percent year over year, much slower than the remarkable 20 percent growth in 2021. The slowed economic growth plus the unprecedented high inflation in major apparel import markets, particularly the United States and Western European countries, adversely affected consumers’ available budget for discretionary expenditures, including clothing purchases.
The world’s textile exports fell by 4.2 percent in 2022, totaling $339 billion, lagging behind most industrial sectors. Such a pattern was understandable as the demand for PPE and related textile raw materials substantially decreased with the pandemic nearing its end.
Pattern #2: China continued to lose market share in clothing exports, which benefited other leading apparel exporters in Asia. Notably, for the first time, Bangladesh surpassed Vietnam and ranked as the world’s second-largest apparel exporter in 2022.
In value, China remained the world’s largest apparel exporter in 2022. However, China’s clothing exports experienced a growth of 3.6 percent, below the global average of 5.0 percent, positioning China at the bottom of the top ten exporters.
China’s global market share in clothing exports dropped to 31.7 percent in 2022, marking its lowest point since the pandemic and a significant decrease from the approximate 38 percent recorded from 2015 to 2018. In fact, China lost market share in almost all major clothing import markets, including the US, the EU, Canada, and Japan. The concerns about the risks of forced labor linked to sourcing from China and the deteriorating US-China relations were among the primary factors driving fashion companies’ eagerness to reduce their ‘China exposure” further.
China has been diversifying its clothing exports beyond the traditional Western markets in response to the challenging business environment. For example, from 2021 to 2022, Asian countries, especially members of the Regional Comprehensive Economic Partnership (RCEP), became relatively more important clothing export markets for China. Nevertheless, since RCEP members primarily consist of developing economies with ambitions to enhance their own clothing production, the long-term growth prospects for their import demand of ‘Made in China’ clothing remain uncertain.
Bangladesh achieved a new record high in its market share of world clothing exports, reaching 7.9 percent in 2022, which exceeded Vietnam’s 6.1 percent. Many fashion companies regard Bangladesh as a promising clothing-sourcing destination with growth potential because of its capability to make cotton garments as China’s alternatives, competitive price, and reduced social compliance risks.
Fashion companies’ efforts to “de-risking from China” also resulted in the robust growth of clothing exports from other large-scale Asian clothing producers in 2022, including Vietnam (up 13 percent), Cambodia (up 12 percent), and India (up 10 percent). In other words, despite the concerns about China, fashion companies still treat Asia as their primary sourcing destination.
Pattern #3: Developed countries stay critical textile exporters, and middle-income developing countries gradually build new textile production and export capability.
The European Union members and the United States stayed critical textile exporters, accounting for 25.1 percent of the world’s textile exports in 2022, up from 24.5 percent in 2021 and 23.2 percent in 2020. Thanks to the increasing demand from apparel producers in the Western Hemisphere, U.S. textile exports increased by 5 percent in 2022, the highest among the world’s top ten.
As a persistent long-term trend, middle-income developing countries have consistently been strengthening their textile production and export capability. For example, China, Vietnam, Turkey, and India’s market shares in the world’s textile exports have steadily risen. They collectively accounted for 56.8 percent of the world’s clothing exports in 2022, a notable increase from only 40 percent in 2010. Also, over time, these middle-income developing countries have achieved a more balanced textiles-to-clothing export ratio.
Pattern #4: Regional textile and apparel trade patterns strengthened further with the growing popularity of near-shoring, particularly in the Western Hemisphere. However, an early indication has emerged that Asian countries are diversifying their sources of textile raw materials away from China to mitigate growing risks.
The regional textile and apparel supply chains were in good shape in Asia and Europe. For example, nearly 80 percent of Asian countries’ textile input and apparel imports came from within the region in 2022. Likewise, approximately half of EU countries’ textile imports were intra-region trade in 2022, and one-third were for apparel.
The Western Hemisphere (WH) textile and apparel supply chain became more integrated in 2022 thanks to the booming near-shoring trends. For example, 20.8 percent of WH countries’ textile imports came from within the region in 2022, up from 20.1 percent in the previous year. Likewise, about 15.1 percent of WH countries’ apparel imports came from within the region in 2022, higher than 14.7 percent in 2021 and 13.9 percent in 2022.
Compared with Asia and the EU, SSA clothing producers used much fewer locally-made textiles (i.e., stagnant at around 11% from 2011 to 2022), reflecting the region’s lack of textile manufacturing capability. A more comprehensive examination of strategies for bolstering the textile manufacturing sector in Sub-Saharan Africa, particularly in light of the recently enacted African Continental Free Trade Area (AfCFTA) agreement, might be warranted.
Additionally, data suggests that Asian countries began diversifying their textile imports away from China to mitigate supply chain risks. For example, with the official implementation of anti-forced labor legislation in the US and other primary apparel import markets directly targeting cotton made in China’s Xinjiang region, Asian countries significantly reduced their cotton fabric imports (SITC code 652) from China in 2022. Instead, Asian countries other than China accounted for 46.3 percent of the region’s textile supply in 2022, up from around 42-43 percent between 2019 and 2021.
It is critical to watch how willing, to what extent, and how quickly Asian countries can effectively reduce their dependency on textile supplies from China. The result is also an important reminder that Western fashion companies’ de-risking from China could exert significant and broad impacts across the entire supply chain beyond finished goods.
#1U.S. fashion companies are deeply concerned about the deteriorating U.S.-China bilateral relationship and plan to accelerate “reducing China exposure” to mitigate the risks.
Respondents identified “Finding a new sourcing base other than China” as a more prominent challenge in 2023 than the previous year (i.e., 4th in 2023 vs. 11th in 2022).
This year, over 40 percent of respondents reported sourcing less than 10 percent of their apparel products from China, up from 30 percent of respondents a year ago and a notable surge from only 20 percent in 2019. Similarly, a new record high of 61 percent of respondents no longer use China as their top supplier in 2023, up from 50 percent of respondents in 2022 and much higher than only 25-30 percent before the pandemic.
Nearly 80 percentof respondents plan to reduce apparel sourcing from China over the next two years, with a record high of 15 percent planning to “strongly decrease” sourcing from the country. This strong sentiment was not present in past studies. Notably, large-size U.S. fashion companies (with 1,000+ employees) that currently source more than 10 percent of their apparel products from China are among the most eager to de-risk.
#2 Tackling forced labor risks in the supply chain remains a significant challenge confronting U.S. fashion companies in 2023.
“Managing the forced labor risks in the supply chain” ranks as the 2nd top business challenge in 2023, with 64 percent of respondents rating the issue as one of their top five concerns.
Most surveyed U.S. fashion companies have taken a comprehensive approach to mitigating forced labor risks in the supply chain. Three practices, including “asking vendors to provide more detailed social compliance information,” “attending workshops and other educational events to understand related regulations better,” and “intentionally reducing sourcing from high-risk countries,” are the most commonly adopted by respondents (over 80 percent) in response to forced labor risks and the UFLPA’s implementation.
Since January 1, 2023, U.S. Customs and Border Protection (CBP)’s UFLPA enforcement has affected respondents’ importation of “Cotton apparel products from China,” “Cotton apparel products from Asian countries other than China,” and “Home textiles from China.”
U.S. fashion companies are actively seeking to diversify their sourcing beyond Asia to mitigate the forced labor risks, particularly regarding cotton products.
#3 There is robust excitement about increasing apparel sourcing from members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR).
CAFTA-DR members play a more significant role as an apparel sourcing base this year. Over 80 percent of respondents report sourcing from CAFTA-DR members in 2023, a notable increase from 60 percent in the past few years. Also, nearly 30 percent of respondents placed more than 10 percent of their sourcing orders with CAFTA-DR members this year, a substantial increase from only 19 percent of respondents in 2022 and 10 percent in 2021.
About 40 percent of respondents plan to increase apparel sourcing from CAFTA-DR members over the next two years. Most respondents consider expanding sourcing from CAFTA-DR as part of their overall sourcing diversification strategy.
With U.S. fashion companies actively seeking immediate alternatives to sourcing from China and Asia, respondents emphasize theincreased urgencyof improving textile raw material access to promote further U.S. apparel sourcing from CAFTA-DR members. “Allowing more flexibility in sourcing fabrics and yarns from outside CAFTA-DR” was regarded as the top improvement needed.
#4 US fashion companies demonstrate a solid dedication to expanding their sourcing of clothing made from recycled or other sustainable textile fibers:
Nearly 60 percent of respondents say at least 10 percent of their sourced apparel products already use recycled or other sustainable textile fibers. Another 60 percent of surveyed companies plan to “substantially increase sourcing apparel made from sustainable or recycled textile materials over the next five years.”
Addressing the higher sourcing costs and the low-profit margins are regarded as the top challenge for sourcing clothing using recycled or other sustainable fiber.
About 60 percent of respondents also call for policy support for sourcing clothing using recycled or other sustainable textile materials, such as preferential tariff rates and guidance on sustainability and recycling standards.
#5 Respondents strongly support and emphasize the importance of the early renewal of the African Growth and Opportunity Act (AGOA) and extending the program for at least another ten years.
Respondents sourcing from AGOA members are typically large-scale U.S. fashion brands or retailers (with 1,000+ employees). Generally, these companies treat AGOA as part of their extensive global sourcing network and typically source less than 10 percent of the total sourcing value or volume from the region.
About 40 percent of respondents view AGOA as “essential for my company to source from AGOA members.”
About 60 percent of respondents say the temporary nature of AGOA “has discouraged them from making long-term investments and sourcing commitments in the region.” Many respondents expect to cut sourcing from AGOA members should the agreement is not renewed by June 2024.
About one-third of respondents currently sourcing from AGOA explicitly indicate, “Ethiopia’s loss of AGOA eligibility negatively affects my company’s interest in sourcing from the entire AGOA region.” In comparison, only about 17 percent of respondents say they “have moved sourcing orders from Ethiopia to other AGOA members.
Other topics covered by the report include:
5-year outlook for the U.S. fashion industry, including companies’ hiring plan by key positions
The competitiveness of major apparel sourcing destinations in 2023 regarding sourcing cost, speed to market, flexibility & agility, and compliance risks (assessed by respondents)
Respondents’ qualitative comments on the prospect of sourcing from China and “re-risk”
U.S. fashion companies’ latest social responsibility and sustainability practices related to sourcing
U.S. fashion companies’ trade policy priorities in 2023
Background
This year’s benchmarking study was based on a survey of executives from 30 leading U.S. fashion companies from April to June 2023. The study incorporated a balanced mix of respondents representing various businesses in the U.S. fashion industry. Approximately 73 percent of respondents were self-identified retailers, 60 percent self-identified brands, and 65 percent self-identified importers/wholesalers.
The respondents to the survey included both large U.S. fashion corporations and medium to small companies. Around 77 percent of respondents reported having more than 1,000 employees. And the rest (23 percent) represented medium to small-sized companies with 100-999 employees.
The latest OTEXA trade data suggests several US apparel import patterns:
First, US apparel imports indicated a slow improvement in April 2023 but remained weak this year. For example, measured in quantity, US apparel imports fell by 33.9% in April 2023 from a year ago, but it was less significant than in March (i.e., down 40.2% YoY*). Likewise, measured in value, US apparel imports fell by 29.3% YoY in April 2023, which improved from a 32.7% YoY decline in March 2023. (*YoY: Year-over-year)
Overall, the shrinking US apparel import volume reflected the headwinds in the US economy and consumers’ hesitancy to purchase clothing amid financial uncertainties and high inflation. Recent economic indicators also present a mixed picture of the US economy’s growth trajectory. For example, while the US consumer confidence index slightly went up from 68.0 in March to 69.6 in April 2023 (January 2019=100), the advanced clothing store sales index in April fell to 115.6 (Jan 2019=100), the lowest so far in 2023 (e.g., was 120.6 in January 2023). However, since summer is traditionally a peak season for clothing sales, followed by events like back-to-school shopping, there remains hope that US apparel imports may experience a slight recovery at some point in the second half of the year.
Second, trade data suggested that US apparel imports came from more diverse sources. For example, the Herfindahl–Hirschman index (HHI) fell below 0.1 in the first four months of 2023. Likewise, the market shares of the five largest suppliers (CS5) fell below 60% for the first time since 2018. The result suggested that leveraging sourcing diversification is a prevalent strategy among US fashion companies to mitigate supply chain risks and address market uncertainties.
Third, US fashion companies are serious and eager to further reduce their “China exposure.” Although China remained the top apparel supplier to the US, its market share fell to a new low of 17.9% in value and 30.6% in quantity in the first four months of 2023. Notably, for the first time in decades, less than 10% of US cotton apparel imports came from China in March/April 2023, revealing the significant impact of the Uyghur Forced Labor Prevention Act (UFLPA) on US fashion companies’ China sourcing strategies.
Related, US fashion companies appear to be increasingly cautious about sourcing apparel from Vietnam as its supply chain is too exposed to China, raising concerns about forced labor risks. In value, Vietnam accounted for 17.3% of US apparel imports in the first four months of 2023, down from 18.6% a year ago. Notably, almost the same amount of Vietnam’s textile and apparel products were subject to the CBP’s UFLPA investigation as China in FY2023.
Fourth, large-scale Asian countries benefited the most as US fashion companies looking for China’s alternatives. Specifically, measured in value, about 70.6% of US apparel imports came from Asia in the first four months of 2023, down from 74.9% in 2022. However, the five largest apparel exporting countries in Asia other than China (i.e., Vietnam, Bangladesh, Indonesia, India, and Cambodia) accounted for 44.7% of US apparel imports in the first four months of 2023, a new high since 2018 (i.e., was 35.3%). These countries are among the most popular “alternatives to China” because of their balanced performance regarding production capacity, cost, flexibility, and compliance risks.
Fifth, US fashion companies are also actively exploring new near-shoring opportunities from the Western Hemisphere. For example, about 17.3% of US apparel imports came from Western Hemisphere countries in the first four months of 2023, up from 15.6% in 2023. That being said, measured in quantity, US apparel imports from Mexico and CAFTA-DR members fell by 13.0% and 21.2% in the first four months of 2023 from a year ago due to the struggling US economy. It will be interesting to see whether CAFTA-DR and Mexico can keep or enhance their market shares when the US import demand recovers.
ASKET is a prominent online retailer based in Sweden that commits to complete supply chain transparency. Based on analyzing nearly 40 unique products and their detailed supply chain information posted on ASKET’s website as of May 2023, the article aims to shed light on the company’s supply chain traceability progress and the remaining challenges it faces.
First, while ASKET achieved full traceability for Tier 1 suppliers, tracking Tier 2 and Tier 3 suppliers was more difficult. For example, compared with its perfect traceability score for Tier 1 suppliers (i.e., garment factories), ASKET’s average traceability for Tier 2 Milling factories (i.e., yarn and fabric producers) was at around 97%, and the score fell to only 77% for trims suppliers in Tier 3.
As one critical contributing factor to the phenomenon, Tier 2 and Tier 3 suppliers had far more players than Tier 1, which presented a more significant challenge inobtaining detailed information about all the factories involved. For example, ASKET’s garment cutting and sewing operations predominantly occurred within a single facility. In contrast, making yarns, fabrics, and trims EACH usually involve multiple facilities in different parts of the world.
Second, a comprehensive understanding of the sub-supply chains associated with apparel components is pivotal in enhancing a fashion company’s overall traceability. Notably, the apparel supply chain is far more complicated than the commonly known four stages—fiber, yarn, fabric, and garment manufacturing. Rather, apparel components like yarns, fabrics, sewing threads, buttons, and zippers have complex and intricate sub-supply chains. For instance, for ASKET’s shirts or polo shirts:
Cotton was “farmed in New Mexico, Arizona, California and Texas, USA, ginned in Anqing, China.”
Yarn was “spun and twisted in Hyderabad, India,” and “dyed in Varese, Italy.”
Fabric was “woven in Letohrad, Czech Republic, dyed and finished in Prato, Italy.”
Sewing thread was “produced in Breisgau, Germany, wound and packed in St. Maria de Palautordera, Spain”
Button was produced in Saccolongon, Italy, with corozo farmed in Manabi, Ecuador.
Third, using recycled textile materials in apparel products could make it trickier to map the supply chain.
ASKET reported no problem tracking recycled textile materials derived from natural fibers, especially recycled wool products.
ASKET’s capability of tracing recycled man-made fiber textiles yielded mixed results. For example, ASKET was still investigating the Tier 3 raw material suppliers for one fabric made with “100% pre-consumer recycled nylon.” Likewise, for one body fabric derived from “plastic waste collected from Spanish Mediterranean and French Atlantic oceans and coastlines,” pinpointing the precise origin of the raw fiber posed a challenge.
Fourth, ASKET’s data shows that using recycled textiles in apparel products could incur higher transportation costs. For example, the average transportation cost for an ASKET garment using recycled textiles would reach $5 per unit (or 6.3% of the total production costs), much higher than regular clothing using non-recycled materials ($1 per unit or 3% of the total production). However, on average, making a garment using recycled textile materials could involve fewer facilities(e.g., 9 vs. 12). This result suggests that the higher transportation cost associated with clothing made from recycled textiles may not be attributed to a longer supply chain but rather to a more tedious and expensive recycled fiber collection process.
Additionally, ASKET’s data indicates a strong correlation between its retail price and sourcing costs. Specifically, ASKET’s applied a gross margin% ranging from 71%–81%. This implies that a $2 increase in sourcing costs could potentially lead to a retail price increase of $10-$20. Thus, controlling and managing sourcing costs will always be a priority for a fashion company.
The full paper is HERE. Below are the key findings:
Over the past decade, U.S. fashion brands and retailers have seen Central America as a critical emerging apparel-sourcing destination. Especially since implementing the Dominican-Republic Central America Free Trade Agreement (CAFTA-DR) in 2006, a trade deal among the United States, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic (joined in 2007), and Costa Rica (joined in 2009), apparel sourcing from the region gained consistent interest among U.S. companies.
Nevertheless, U.S. apparel sourcing from CAFTA-DR members is NOT without significant challenges. For example, CAFTA-DR countries’ market shares in the U.S. apparel import market fell from 11.8% in 2005 before the trade agreement entered into force to only 10.6% in 2022, measured by value. Trade data also indicated that U.S. apparel sourcing from CAFTA-DR members concentrated on simple and low-value items, such as T-shirts, and lacked product diversification with no improvement over the years.
Given the high stakes of improving the status quo, this study quantitatively evaluated the impact of textile raw material access on CAFTA-DR’s apparel exports to the United States. Specifically, this study assumed that CAFTA-DR members cut their textile import tariff rates to improve garment producers’ textile raw material access (i.e., to reduce the cost of sourcing textiles from anywhere in the world and beyond the U.S. supply). The computable general equilibrium (CGE) model estimation based on the GTAP9 database shows mixed results:
On the one hand, cutting CAFTA-DR members’ textile import tariffs to improve their garment producers’ textile raw material access would significantly improve CAFTA-DR members’ price competitiveness of their apparel exports to the United States and increase the export volume.
However, cutting CAFTA-DR members’ textile import tariffs to improve their garment producers’ textile raw material access would significantly expand their textile imports from non-U.S. sources. This means that CAFTA-DR members’ dependence on the U.S. textile raw material supply may decline further.
Overall, the study’s findings remind us that the debate on expanding U.S. apparel sourcing from CAFTA-DR members should go beyond CAFTA-DR members’ garment production. Instead, more efforts could be made to enhance CAFTA-DR garment producers’ textile raw material access as an effective way to expand the region’s apparel exports to the United States.
Meanwhile, several leading CAFTA-DR apparel exporting countries, including Honduras and Nicaragua, have been engaged in negotiations for free trade agreements with China, Taiwan, and other Asian economies. As the study’s findings indicate, these new trade deals could incentivize CAFTA-DR apparel manufacturers to increase their textile sourcing from Asia. In other words, inaction on the U.S. side and maintaining the status quo still could have significant implications for the future stability of the Western Hemisphere textile and apparel supply chain.
PVH Corporation (PVH), which owns well-known brands including Calvin Klein, Tommy Hilfiger, Van Heusen, Arrow, and Izod, is one of the largest US fashion companies with nearly $9.2 billion in sales revenues in 2022.
By leveraging PVH’s publically released factory lists, this article analyzes the company’s detailed sourcing strategies and changes from 2021 to 2022. Key findings:
Trend 1: PVH adopts a diverse apparel sourcing base and continues to work with more vendors. Specifically, in 2022, PVH sourced apparel from as many as 37 countries in Asia, Europe, America, the Middle East, and Africa, the same as in 2021. Despite not expanding the number of countries it sources from, PVH increased its total number of vendors from 503 in 2021 to 553 in 2022, highlighting the company’s ongoing commitment to diversifying its sourcing base.
Trend 2: Asia is PVH’s dominant sourcing base for finished garments and textile raw materials.
Specifically, about 56.2% of PVH’s apparel suppliers were Asia-based in 2022, followed by the EU (20.3%). Compared with a year ago, PVH even added twenty new Asia-based factories to its supplier list in 2022, suggesting no intention of reducing sourcing from the region. Moreover, From 2021 to 2022, as many as 83% of PVH’s raw material suppliers were Asia-based, far exceeding any other regions.
Trend 3: PVH’s China sourcing strategies are evolving and more complicated than simply “reducing China exposure.”
First, PVH continued to work with MORE Chinese factories. Specifically, between 2021 and 2022, PVH added 17 Chinese factories to its apparel supplier list, more than other countries. However, the expansion could be because of PVH’s growing sales in China.
Second, PVH’s garment factories in China are smaller than their peers in other Asian countries. For example, in 2022, most PVH’s contracted garment factories in top Asian supplying countries, such as Bangladesh (87.5%), Vietnam (63.3%), and Sri Lanka (65.3%), had more than 1,000 workers. In comparison, only 11.3% of PVH’s Chinese vendors had 1,000 workers, and more than 62.5% had fewer than 500 workers. The result suggests that PVH treats China as an apparel sourcing base for flexibility and agility, particularly those orders that may include a greater variety of products in relatively smaller quantities.
Further, PVH often priced apparel “Made in China” higher than those sourced from the rest of Asia.
Trend 4: PVH actively used “emerging” sourcing destinations outside Asia. Other than those top Asian suppliers, PVH’s apparel sourcing base includes several countries in America, the EU, and Africa that deserve more attention, including Portugal, Brazil, Tunisia, and Turkey. Overall, PVH sourced from these countries for various reasons, from serving local consumers, seeking sourcing flexibility, accessing raw materials, and lowering sourcing costs.
Trend 1: US fashion companies continue to diversify their sourcing base in 2022
Numerous studies suggest that US fashion companies leverage sourcing diversification and sourcing from countries with large-scale production capacity in response to the shifting business environment. For example, according to the 2022 fashion industry benchmarking study from the US Fashion Industry Association (USFIA), more than half of surveyed US fashion brands and retailers (53%) reported sourcing apparel from over ten countries in 2022, compared with only 37% in 2021. Nearly 40% of respondents plan to source from even more countries and work with more suppliers over the next two years, up from only 17% in 2021.
Trade data confirms the trend. For example, the Herfindahl–Hirschman index (HHI), a commonly-used measurement of market concentration, went down from 0.110 in 2021 to 0.105 in 2022, suggesting that US apparel imports came from even more diverse sources.
Trend 2: Asia as a whole will remain the dominant source of imports
Measured in value, about 73.5% of US apparel imports came from Asia in 2022, up from 72.8% in 2021. Likewise, the CR5 index, measuring the total market shares of the top five suppliers—all Asia-based, i.e., China, Vietnam, Bangladesh, Indonesia, and India, went up from 60.6% in 2021 to 61.1% in 2022. Notably, the CR5 index without China (i.e., the total market shares of Vietnam, Bangladesh, Indonesia, India, and Cambodia) enjoyed even faster growth, from 40.7% in 2021 to 43.7% in 2022.
Additionally, facing growing market uncertainties and weakened consumer demand amid high inflation pressure, US fashion companies may continue to prioritize costs and flexibility in their vendor selection. Studies consistently show that Asia countries still enjoy notable advantages in both areas thanks to their highly integrated regional supply chain, production scale, and efficiency. Thus, US fashion companies are unlikely to reduce their exposure to Asia in the short to medium term despite some worries about the rising geopolitical risks.
Trend 3: US fashion companies’ China sourcing strategy continues to evolve
Several factors affected US apparel sourcing from China negatively in 2022:
One was China’s stringent zero-COVID policy, which led to severe supply chain disruptions, particularly during the fall. As a result, China’s market shares from September to November 2022 declined by 7-9 percentage points compared to the previous year over the same period.
The second factor was the implementation of the Uyghur Forced Labor Prevention Act (UFLPA) in June 2022, which discouraged US fashion companies from sourcing cotton products from China. For example, only about 10% of US cotton apparel came from China in the fourth quarter of 2022, down from 17% at the beginning of the year and much lower than nearly 27% back in 2018.
The third contributing factor was the US-China trade tensions, including the continuation of Section 301 punitive tariffs. Industry sources indicate that US fashion companies increasingly source from China for relatively higher-value-added items targeting the premium or luxury market segments to offset the additional sourcing costs.
Further, three trends are worth watching regarding China’s future as an apparel sourcing base for US fashion companies:
One is the emergence of the “Made in China for China” strategy, particularly for those companies that view China as a lucrative sales market. Recent studies show that many US fashion companies aim to tailor their product offerings further to meet Chinese consumers’ needs and preferences.
Second is Chinese textile and apparel companies’ growing efforts to invest and build factories overseas. As a result, more and more clothing labeled “Made in Bangladesh” and “Made in Vietnam” could be produced by factories owned by Chinese investors.
Third, China could accelerate its transition from exporting apparel to providing more textile raw materials to other apparel-exporting countries in Asia. Notably, over the past decade, most Asian apparel-exporting countries have become increasingly dependent on China’s textile raw material supply, from yarns and fabrics to various accessories. Moreover, recent regional trade agreements, particularly the Regional Comprehensive Economic Partnership (RCEP), provide new opportunities for supply chain integration in Asia.
Trend 4: US fashion companies demonstrate a new interest in expanding sourcing from the Western Hemisphere, but key bottlenecks need to be solved
Trade data suggests a mixed picture of near-shoring in 2022. For example, members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) and US-Mexico-Canada Trade Agreement (USMCA) accounted for a declining share of US apparel imports in 2022, measured in quantity and value. While CAFTA-DR and USMCA members showed an increase in their market share of US apparel imports in the fourth quarter of 2022, reaching 10.7% and 3.1%, respectively, this growth was not accompanied by an increase in trade volume. Instead, US apparel imports from these countries decreased by 11% and 15%, respectively, compared to the previous year. CAFTA-DR and USMCA members’ gain in market share was mainly due to a sharper decline in US apparel imports from the rest of the world (i.e., decreased by over 25% in the fourth quarter of 2022).
Trade data also suggests two other bottlenecks preventing more US apparel sourcing from CAFTA-DR and USMCA members. One is the lack of product diversity. For example, the product diversification index consistently shows that US apparel imports from CAFTA-DR members and Mexico concentrated on only a limited category of products, and the problem worsened in 2022. The result explained why US fashion companies often couldn’t move souring orders from Asia to CAFTA-DR and USMCA members.
Another problem is the underutilization of the trade agreement. For example, CAFTA-DR’s utilization rate for US apparel imports consistently went down from its peak of 87% in 2011 to only 74% in 2021. The utilization rate fell to 66.6% in 2022, the lowest since CAFTA-DR fully came into force in 2007. This means that as much as one-third of US apparel imports from CAFTA-DR did NOT claim the agreement’s preferential duty benefits. Thus, regarding how to practically grow US fashion companies’ near-shoring, we could expect more public discussions and debates in the new year.
This study aims to understand western fashion brands and retailers’ latest China apparel sourcing strategies against the evolving business environment. We conducted a content analysis of about 30 leading fashion companies’ public corporate filings (i.e., annual or quarterly financial reports and earnings call transcripts) submitted from June 1, 2022 to December 31, 2022.
The results suggest several themes:
First, China remains one of the most frequently used apparel sourcing destinations. For example:
Express says, “The top five countries from which we sourced our merchandise in 2021 were Vietnam, China, Indonesia, Bangladesh and the Philippines, based on total cost of merchandise purchased.”
According to TJX, “a significant amount of merchandise we offer for sale is made in China.”
Children’s Place says, “We source from a diversified network of vendors, purchasing primarily from Vietnam, Cambodia, Indonesia, Ethiopia, Bangladesh, and China.“
Ralph Lauren adds, “In Fiscal 2022, approximately 97% of our products (by dollar value) were produced outside of the US, primarily in Asia, Europe, and Latin America, with approximately 19% of our products sourced from China and another 19% from Vietnam.
However, many fashion companies have significantly cut their apparel sourcing volume from China. More often, China is no longer the No.1 apparel sourcing destination, overtaken by China’s competitors in Asia, such as Vietnam.
According to Lululemon, “During 2021, approximately 40% of our products were manufactured in Vietnam, 17% in Cambodia, 11% in Sri Lanka, 7% in China (PRC), including 2% in Taiwan, and the remainder in other regions… From a sourcing perspective, when looking at finished goods for the upcoming 2022 fall season, Mainland China represents only 4% to 6% of our total unit volume.”
Levi’s says, “The good thing about our supply chain is we’ve got truly a global footprint. We don’t manufacture a whole lot in China anymore. We’ve been slowly divesting manufacturing out of China, if you will, and kind of playing our chips elsewhere on the global map… Less than 1% of what we’re bringing into this country, into the US, less than 1% of it is coming from China.”
Adidas says, “In 2021, we sourced 91% of the total apparel volume from Asia (2020: 93%). Cambodia is the largest sourcing country, representing 21% of the produced volume (2020: 22%), followed by China with 20% (2020: 20%) and Vietnam with 15% (2020: 21%).”
Victoria’s Secret says, “On China, China is a single-digit percentage of our total inflow of merchandise. We’re not particularly dependent on China at all.”
Nike: “As of May 31, 2022, we were supplied by 279 finished goods apparel contract factories located in 33 countries. For fiscal 2022, contract factories in Vietnam, China and Cambodia manufactured approximately 26%, 20% and 16% of total NIKE Brand apparel, respectively“
Meanwhile, fashion companies still heavily use China as a sourcing base for textile raw materials (such as fabrics). For example:
Columbia Sportswear says it sources most of its finished products from Vietnam, but “a large portion of the raw materials used in our products is sourced by our contract manufacturers in China.”
Likewise, Puma says, “90% of our recycled polyester comes from Vietnam, China, Taiwan (China) and Korea.”
Guess says, “During fiscal 2022, we sourced most of our finished products with partners and suppliers outside the U.S. and we continued to design and purchase fabrics globally, with most coming from China.”
Lulumemon says, “Approximately 48% of the fabric used in our products originated from Taiwan, 19% from China Mainland, 11% from Sri Lanka, and the remainder from other regions.”
Second, Western fashion companies unanimously ranked the COVID situation as one of their top concerns for China. Many companies reported significant sales revenue and profits loss due to China’s draconian “zero-COVID” policy and lockdown measures. For example,
Tapestry says, “For Greater China, sales declined 11% due to lockdowns and business disruption… as a result, we have tempered our fiscal year 2023 outlook based on the expectation for a delayed recovery in China.”
Adidas says, “With Great China… we continue to see several market-specific challenges that are affecting our entire industry. The strict zero COVID-19 policy with nationwide restrictions remains in place amid more than 2000 daily new COVID-19 cases in November. As a consequence, offline traffic is subdued due to the imminent risk of new lockdowns.
Under Armour says, “Ongoing impacts of the COVID-19 pandemic and related preventative and protective actions in China…have negatively impacted consumer traffic and demand and may continue to negatively impact our financial results.”
VF Corporation says, “The performance in Greater China…continues to be impacted by widespread rolling COVID lockdowns and restrictions as well as lower consumer spending.”
Puma says, “COVID-19-related restrictions are still impacting business in Greater China, and higher freight rates and raw material prices continue to put pressure on margins.”
Notably, despite China’s most recent COVID policy U-turn, most fashion companies expect market uncertainties to stay in China, at least in the short run, given the surging COVID cases and policy unpredictability. For example:
PVH says, “While we remain optimistic about our business in China, it continues to be a challenging environment as restrictions have once again intensified in the fourth quarter of 2022.”
Nike says, “So we’ve taken a very cautious approach in our guidance to China, given the short-term uncertainties that are there.”
Abercrombie & Fitch also listed China’s COVID situation as one of their top risk factors, “risks and uncertainty related to the ongoing COVID-19 pandemic, including lockdowns in China, and any other adverse public health developments.”
Third, fashion companies report the negative impacts of US-China trade tensions on their businesses. Also, as the US-China relationship sours, fashion bands and retailers have been actively watching the potential effect of geopolitics. For example,
Express says, “recent geopolitical conditions, including impacts from the ongoing conflict between Russia and Ukraine and increased tensions between China and Taiwan, have all contributed to disruptions and rising costs to global supply chains.”
When assessing the market risk factors, Chico’s FAS says, “our reliance on sourcing from foreign suppliers and significant adverse economic, labor, political or other shifts (including adverse changes in tariffs, taxes or other import regulations, particularly with respect to China, or legislation prohibiting certain imports from China)”
Adidas holds the same view, “In addition, the challenging market environment in China had an adverse impact on the company’s business activities… Additional challenges included the geopolitical situation in China and extended lockdown measures.”
Macy’s adds, “At this time, it is unknown how long US tariffs on Chinese goods will remain in effect or whether additional tariffs will be imposed. Depending upon their duration and implementation, as well as our ability to mitigate their impact, these changes in foreign trade policy and any recently enacted, proposed and future tariffs on products imported by us from China could negatively impact our business, results of operations and liquidity if they seriously disrupt the movement of products through our supply chain or increase their cost.”
Gap Inc. says, “Trade matters may disrupt our supply chain. For example, the current political landscape, including with respect to U.S.-China relations, and recent tariffs and bans imposed by the United States and other countries (such as the Uyghur Forced Labor Prevention Act) has introduced greater uncertainty with respect to future tax and trade regulations.”
QVC says, “The imposition of any new US tariffs or other restrictions on Chinese imports or the taking of other actions against China in the future, and any responses by China, could impair our ability to meet customer demand and could result in lost sales or an increase in our cost of merchandise, which would have a material adverse impact on our business and results of operations.”
Additionally,NO evidence shows that fashion companies are decoupling with China. Instead, Western fashion companies, especially those with a global presence, still hold an optimistic view of China as a long-term business opportunity. For example:
Inditex, which owns Zara, says, “we remain absolutely confident about our opportunities there (in China) in the medium to long term. Fashion demand continues to be strong in China. For sure it will remain a core market for us for Inditex.”
Ralph Lauren says, “China provides not only the successful blueprint for our elevated ecosystem strategy globally, it also represents one of several geographic long-term opportunities for our brand…We continue to see near and long term brand opportunities in China.”
Lululemon says, “On China, we remain very excited…we remain very, very excited about the potential and the role that will play in quadrupling our international business with Mainland China.”
Nike says, “We have remained committed to investing in Greater China for the long term.”
Adidas says, “On China, clearly, we believe in as a midterm opportunity in China… And then when the market opens up (from COVID), we believe, the western brand is well-positioned in China again, and we can start growing significant in China again.”
Meanwhile, Western fashion companies plan to make more efforts to localize their product offer and cater to the specific needs of Chinese consumers, especially the young generation. The “Made in China for China” strategy could become more popular among Western fashion companies. For example,
PVH says, “So, I think in general, our production in China is heavily oriented to China for China production. I think for us generally speaking, the biggest impact of the shutdowns that we’ve seen across Shanghai and Beijing has really been focused on the impact to our China market.”
Likewise, Levi’s says, “We’re manufacturing somewhere in the neighborhood of 5% of our global production is in China, and most of it staying in China.“
Hanesbrands says, “we’re committed to opening new stores, and that’s continues to go well, despite, the challenges that are there. Looking specifically at Champion, we continued our expansion in China adding new stores in the quarter through our partners.”
H&M says, “we still see China as an important market for us.”
According to Hugo Boss, “Thanks to overall robust local demand, revenues in China in 2021 grew 24% as compared to 2019.”
VF Corporation adds, “China is a significant opportunity…(We are) really pushing decision-making into the regions and providing more and more latitude for local-for-local decision-makings around product, around storytelling, certainly staying within the confines or the framework of the brand strategy, but really giving more freedom and more empowerment to the regions.”
Mango is a fashion company based in Barcelona, Spain that was founded in 1984 by brothers Isak Andic and Nahman Andic. The company has grown significantly since its inception and now has over 2,700 stores in 109 countries worldwide. Mango is known for its trendy and high-quality clothing, which is targeted toward young women.
One of the critical factors in Mango’s success has been its ability to stay current and relevant in the fast-paced fashion world. The company regularly collaborates with top designers and influencers to create unique and fashionable collections that appeal to its target audience. Mango also closely monitors emerging trends and adapts its collections accordingly.
Besides clothing, Mango also offers accessories, such as bags, shoes, jewelry, and a home collection. The company has a solid online presence, with an e-commerce website that allows customers to shop from anywhere in the world.
In December 2022, Mango announced the Sustainable 2030 strategy, which “aims to move towards the full traceability and transparency of its value chain, in order to continue with the process of auditing its suppliers and ensuring that appropriate working conditions are being fulfilled for the workers in the factories the company works with around the world.” As part of the strategy, Mango will “focus its efforts on moving towards a more sustainable collection, prioritizing materials with a lower environmental impact and incorporating circular design criteria, so that by 2030 these will predominate in the design of its products and all its fibers will be of sustainable origin or recycled.”
Mango’s Apparel Sourcing Strategies (as of December 2022)
First, Mango adopted a sophisticated global sourcing network for its apparel products. Specifically, Mango’s apparel supply chain involves 1,878 Tier 1, Tier 2, and Tier 3 factories in 29 countries worldwide. About 31% of these factories produce garments (Tier 1), 19% supply fabrics (Tier 2), and 49% provide textile raw materials like yarns and accessories (Tier 3). Further, about 407 factories (or 21%) have vertical production capability (e.g., making both finished garments and textile inputs).
Second, like many EU fashion companies, near-shoring from the EU and Turkey is a critical feature of Mango’s apparel sourcing strategy. For example, about 44.8% of Mango’s Tier 1 garment suppliers were EU based (including Turkey), whereas Asia suppliers only accounted for 54%. Likewise, about 34% of Mango’s Tier 2 fabric suppliers and nearly half of its Tier 3 yarn and accessories suppliers were also EU based. The result reflects the EU’s intra-region textile and apparel trade patterns, supported by the region’s relatively complete textile and apparel supply chain. In comparison, US fashion companies typically source more than 80% of finished garments from Asia, and most of these garments also use Asia-based textile raw materials.
Third, measured by the number of suppliers, Mango’s top Tier 1 apparel production bases include Turkey (187 factories), China (176 factories), India (135 factories), and Italy (107 factories). Industry sources further indicated that between 2021 and 2022, Mango primarily sourced from Turkey and India for Tops (69% and 78%, respectively). Mango’s imports from China and Italy were more diverse in product categories (e.g., dresses, outwear, bottoms, and swimwear). On the other hand, Mango’s apparel imports from Italy were much higher priced ($107 retail price on average) than those from the other three countries ($38-41 retail price on average).
Fourth, the factory size and vertical production capabilities of Mango’s suppliers seem to vary by region. Notably, Mango’s Asia-based suppliers are more likely to be large-sized (with 1,000+ employees) and offer vertical production (e.g., making both finished garments and textile input). Mango’s Africa and America-based suppliers were relatively small-sized or lacked vertical integration.
This article provided a comprehensive review of the world textiles and clothing trade patterns in 2021 based on the newly released data from the World Trade Statistical Review 2022 and the United Nations (UNComtrade). Affected by the ongoing pandemic and companies’ evolving production and sourcing strategies in response to the shifting business environment, the world textiles and clothing trade patterns in 2021 included both continuities and new trends. Specifically:
Pattern #1: As the world economy recovered from COVID, the world clothing export boomed in 2021, while the world textile exports grew much slower due to a high trade volume the year before. Specifically, thanks to consumers’ strong demand, world clothing exports in 2021 fully bounced back to the pre-COVID level and exceeded $548.8bn, a substantial increase of 21.9% from 2020. The apparel sector is not alone. With economic activities mostly resumed, the world merchandise trade in 2021 also jumped 26.5% from a year ago, the fastest growth in decades.
In comparison, the value of world textiles exports grew slower at 7.8% in 2021 (i.e., reached $354.2bn), lagging behind most sectors. However, such a pattern was understandable as the textile trade maintained a high level in 2020, driven by high demand for personal protective equipment (PPE) during the pandemic.
Nevertheless, the world textiles and clothing trade could face strong headwinds down the road due to a slowing world economy and consumers’ weakened demand. Notably, amid hiking inflation, high energy costs, and retrenchment of global supply chains, leading international economic agencies, from the World Bank to the International Monetary Fund (IMF), unanimously predict a slowing economy worldwide. Likewise, the World Trade Organization (WTO) forecasts that the growth of world merchandise trade will be cut to 3.5% in 2022 and down further to only 1% in 2023. As a result, the world textiles and clothing trade will likely struggle with stagnant growth or a modest decline over the next two years.
Pattern #2: COVID did NOT fundamentally shift the competitive landscape of textile exports but affected the export product structure. Meanwhile, some long-term structural changes in world textile exports continued in 2021.
Specifically, China, the European Union (EU), and India remained the world’s three largest textile exporters in 2021, a pattern that has stayed stable for over a decade. Together, these top three accounted for 68% of the world’s textile exports in 2021, similar to 66.9% before the pandemic (2018-2019). Other textile exporters that made it to the top ten list in 2021 were also the same as a year ago and before the pandemic (2018-2019).
Meanwhile, the growth rate of the top ten textile exporters varied significantly in 2021, ranging from -5.5% (China) to 47.8% (India). The demand shift from PPE to apparel-related yarns and fabrics was a critical contributing factor behind the phenomenon. For example, China’s PPE-related textile exports decreased by more than $33bn (or down 43%) in 2021. In contrast, the world knit fabric exports (SITC code 655) surged by more than 30% in 2021, led by India (up 74%) and Pakistan (up 72%). Nevertheless, as consumers’ lifestyles almost reached a “new normal,” we could expect the textile export product structure to stabilize soon.
On the other hand, as a trend already emerged before the pandemic, middle-income developing countries continued to play a more significant role in textile exports, whereas developed countries lost market shares. For example, the United States, Germany, and Italy led the world’s textile exports in the 2000s, accounting for more than 20% of the market shares. However, these three countries’ shares fell to 12.8% in 2019 and hit a new low of 11.3% in 2021. In comparison, middle-income developing countries like China, Vietnam, Turkey, and India have entered the development stage of expanding textile manufacturing. As a result, their market share in the world’s textile exports rose steadily. These countries also achieved a more balanced textiles/clothing export ratio over the years, meaning more textile raw materials like yarns and fabrics can be locally produced instead of relying on imports. For example, Vietnam, known for its competitive clothing products, achieved a new high of $11.5bn in textile exports in 2021 and ranked sixth globally. Vietnam’s textiles/clothing ratio also doubled from 0.15 in 2005 to 0.37 in 2021. It is not unlikely that Vietnam’s textile exports may surpass the United States over the next few years.
Pattern #3: Countries with large-scale production capacity stood out in world clothing exports in 2021. Meanwhile, clothing exporters compete to become China’s alternatives, but there seems to be no clear winner yet.
Consumers’ surging demand and COVID-related supply chain disruptions significantly impacted the world’s clothing export patterns in 2021. As fashion brands and retailers were eager to find sourcing capacity, countries with large-scale production capacity and relatively stable supply enjoyed the fastest growth in clothing exports. For example, except for Vietnam, which suffered several months of COVID lockdowns, all other top five clothing exporters enjoyed a more than 20% growth of their exports in 2021, such as China (up 24%), Bangladesh (up 30%), Turkey (up 22%), and India (up 24%).
As another critical trend, many international fashion brands and retailers have been trying to reduce their apparel sourcing from China, driven by various economic and non-economic factors, from cost considerations and trade tensions to geopolitics. Notably, despite its strong performance in 2021, China accounted for only 23.1% of US apparel imports in 2022 (January to September), much lower than 36.2% in 2015. Likewise, China’s market shares in the EU, Japanese, and Canadian clothing import markets also fell over the same period, suggesting this was a worldwide phenomenon.
With reduced apparel sourcing from China, fashion companies have actively sought alternative sourcing destinations, but the latest trade data suggests no clear winner yet. For example, Vietnam and Bangladesh, the two most popular candidates for “Next China,” accounted for 6.5% and 5.7% shares in the world’s clothing export in 2021, still far behind China (32.1%). Interestingly, from 2015 to 2021, the world’s top four largest clothing exporters next to China (i.e., Bangladesh, Vietnam, Turkey, and India) did not substantially gain new market shares. Instead, China’s lost market was filled by “the rest of the world.”
Additionally, recent studies show that many fashion companies have switched back to the sourcing diversification strategy in 2022 as managing risks and improving sourcing flexibility become more urgent priorities. In other words, the world’s clothing export market could turn more “crowded” and competitive in the coming years.
Pattern #4: Regional supply chains remain critical features of the world textiles and clothing trade. Several factors support and shape the regional textiles and clothing trade patterns. First, as clothing production often needs to be close to where textile materials are available, many developing clothing-producing countries rely heavily on imported textile materials, primarily from more advanced economies in the same region. Second, through lowered trade barriers, regional free trade agreements also financially encouraged garment producers, particularly in Asia, the EU, and Western Hemisphere (WH), to use locally or regionally made textile materials. Further, fashion companies’ interest in “near-shoring” supported the regional supply chain, and related textiles and clothing trade flows between neighboring countries.
The latest trade data indicated that Asia’s regional textiles and clothing trade patterns strengthened further despite supply chain chaos during the pandemic. Specifically, in 2021, as many as 82% of Asian countries’ textile imports came from within Asia, up from 80% in 2015. China, in particular, has played a more prominent role as a leading textile supplier for other Asian clothing-exporting countries. For example, more than 60% of Vietnam’s textile imports came from China in 2021, a substantial increase from 23% in 2005. The same pattern applied to Pakistan, Cambodia, Bangladesh, and the Association of Southeast Asian Nations (ASEAN) members.
In January 2022, the Regional Comprehensive Economic Partnership (RCEP), a mega free trade agreement involving all major economies in Asia, entered into force. The tariff cut and very liberal rules of origin of the agreement will hopefully drive Asia’s booming regional textiles and clothing trade and further deepen its regional economic integration.
Besides Asia, the regional textiles and clothing trade pattern in the EU (or the so-called Intra-EU trade) was also in good shape. In 2021, 50.8% of EU countries’ textile imports and 37% of clothing imports came from other EU members. This pattern has changed little over the past decade, thanks to many EU countries’ commitment to maintaining local textiles and clothing production rather than outsourcing.
In comparison, the Western Hemisphere (WH) textile and apparel supply chain (e.g., clothing made in Mexico or Central America using US or regionally made textiles) seemed to struggle in recent years. As of 2021, only 20% of WH countries’ textile imports came from within WH, down from 26% in 2015. Likewise, WH countries (mainly the US and Canada) just imported 14.6% of clothing from WH in 2021, down from 15.3% in 2015 and much lower than their EU counterparts (37% in 2021). It will be interesting to see whether US and Canadian fashion companies’ expressed interest in expanding near-shoring may reverse the course.
Furthermore, the regional textiles and clothing trade patterns in Sub-Saharan Africa (SSA) are also worth watching. Compared with Asia and the EU, SSA clothing producers used much fewer locally-made textiles (i.e., stagnant at around 11% only from 2011 to 2021), reflecting the region’s lack of textile manufacturing capability. Most trade programs with SSA countries, such as the US-led African Growth and Opportunity Act (AGOA) and EU’s Everything But Arms (EBA) program, adopt liberal rules of origin for clothing products, allowing third-party textile input to be used. It can be studied whether such liberal rules of origin somehow disincentivize building SSA’s own textile manufacturing sector or are still essential given the reality of SSA’s limited textile production capacity.
The EU region as a whole remains one of the world’s leading producers of textile and apparel (T&A). The EU’s T&A production value totaled EUR135.6 bn in 2019, down around 6% from a year ago (Note: Statistical Classification of Economic Activities or NACE, sectors C13, and C14). The EU’s T&A output value was divided almost equally between textile manufacturing (EUR69.4bn) and apparel manufacturing (EUR66.2bn).
Regarding textile production, Southern and Western EU, where most developed EU members are located, such as Germany, France, and Italy, accounted for nearly 60% of EU’s textile manufacturing in 2020. Further, of EU countries’ total textile output, the share of non-woven and other technical textile products (NACE sectors C1395 and C1396) has increased from 20.2% in 2011 to 23.2% in 2019, which reflects the ongoing structural change of the sector.
Apparel manufacturing in the EU includes two primary segments: one is the medium-priced products for consumption in the mass market, which are produced primarily by developing countries in Eastern and Southern Europe, such as Poland, Hungary, and Romania, where cheap labor is relatively abundant. The other category is the high-end luxury apparel produced by developed Western EU countries, such as Italy, UK, France, and Germany.
It is also interesting to note that in Western EU countries, labor only accounted for 20.3% of the total apparel production cost in 2019, which was substantially lower than 30.1% back in 2006. This change suggests that apparel manufacturing is becoming capital and technology-intensive in some developed Western EU countries—as companies are actively adopting automation technology in garment production.
Because of their relatively high GDP per capita and the size of the population, Germany, Italy, the UK, France, and Spain accounted for nearly 60% of total apparel retail sales in the EU in 2021. Such a market structure has stayed stable over the past decade. Also, reflecting local consumers’ preference, EU apparel brands overall outperform non-EU brands in the EU retail market.
Intra-region trade is an essential feature of the EU’s textile and apparel industry. Despite the increasing pressure from cost-competitive Asian suppliers, statistics from UNComtrade show that of the EU region’s total textile imports in 2019, as much as 53.8% were in the category of intra-region trade. However, it could result from increased PPE imports from Asia, EU countries’ Intra-region trade% for textiles dropped to 40% in 2020.
Meanwhile, about one-third of EU countries’ apparel imports came from other EU members during 2019-2020. In comparison, close to 98% of apparel consumed in the United States was imported over the same period, of which more than 75% came from Asia (Eurostat, 2022; UNComtrade, 2022).
Regarding EU countries’ textile and apparel trade with non-EU members (i.e., extra-region trade), the United States remained one of the EU’s top export markets and a vital textile supplier (mainly for technical and industrial textiles). Meanwhile, Asian countries, led by China, and Bangladesh, served as the dominant apparel sourcing base outside the EU region for EU fashion brands and retailers. Turkey was another important apparel sourcing base for EU fashion companies. There is no sign that COVID-19 has shifted the trade pattern.
Additionally, Vietnam was EU’s sixth-largest extra-region apparel supplier in 2020 (after China, Bangladesh, Turkey, India, and Cambodia), accounting for 4% in value. The EU-Vietnam Free Trade Agreement which took effect in August 2020, could encourage more EU apparel sourcing from the country in the long run.
According to the European Apparel and Textile Federation (Euratex), the EU textile and apparel industry continued to recover from COVID-19. For example, the value of textile and apparel output has already reached its pre-pandemic level by the end of 2022. However, Euratex warns that the EU textile and apparel industry still faces significant challenges from a slowed economy, hiking energy costs as a result of the Russia-Ukraine war, and high inflation.
By leveraging industry sources and a content analysis of companies’ websites, this study explores how retailers carry and sell clothing made from recycled textile materials in the five largest European economies, namely the United Kingdom (UK), Italy, Germany, France, and Spain.
The results show that:
The recycled clothing market in the five EU countries has enjoyed fast growth over the past three years. However, recycled clothing remains a niche product. Ultimately, recycled clothing only accounted for 1.5% of clothing launched in the five EU markets as of 2022.
EU retailers adopt distinct merchandising strategies for clothing made from recycled textile materials. For example, clothing made from recycled materials concentrates on specific product categories, including outwear, swimwear, and bottoms, but is less likely to be available for categories including tops and dresses.
Affected by the recycling technologies and the raw material supply, recycled clothing sold in the five EU countries mainly uses recycled polyester or a combination of two or more recycled fibers. In comparison, it is still rare to see clothing made from 100% recycled cotton (less than 1% of the market total), given the technical difficulty of making recycled cotton strong and durable enough. The unbalanced supply of recycled textile raw materials by fiber types also contributes to the phenomenon that recycled clothing concentrates on specific categories.
Recycled clothing looks more “boring” or “dull” than regular new clothing overall–as much as 80% of recycled clothing available in the five EU countries adopted the plain pattern (i.e., the apparel item does not contain any graphics, spots, florals, or other designs) compared to only 60% of regular new clothing.
Retailers in the five EU countries generally tend to price recycled clothing lower than regular new clothing in the luxury & premium segment but often higher in the mass & value market. The results reflect the dilemma of pricing recycled clothing: whereas the production costs could be higher, consumers do not often see the value of such product (i.e., unwilling to pay a price premium).
The findings enhance our understanding of the business aspect of recycled clothing, especially from retailers’ perspectives. The results suggest that advancing recycling technologies will be critical to overcoming the physical shortcomings of recycled clothing and diversifying the product offers in the market. Meanwhile, in collaboration with other stakeholders, retailers can do more to help consumers better understand the benefits of shopping for recycled clothing and change their perceptions about its low value and inferior quality.
Short bio:Leah Marsh is a Fashion Merchandising and Management major at the University of Delaware (UD) & 2022 UD summer scholar. She is also a World Scholar, a competitive UD program aiming to offer students with unique global learning experiences and networking. Leah is recently admitted to the 4+1 fashion and apparel studies graduate program at the University of Delaware. Additionally, Leah is a UD BlueHen Social Media Ambassador.
First, US apparel imports enjoyed a decent growth but started to face softening demand.
Thanks to consumers’ spending, in the first half of 2022, US apparel imports went up 40% in value and 24% in quantity from a year ago.
However, due to US consumers’ weakening demand amid the economic downturn, the speed of import expansion is slowing down quickly. As an alert, the US consumer confidence index (CCI) fell to 54.8 in June 2022 (January 2019=100), the lowest since the pandemic. This result suggests that US consumers were increasingly worried about their household’s financial outlook and would hold back their discretionary clothing spending.
The month-over-month growth of US apparel imports dropped to only 2.6% in value and nearly zero in quantity in June 2022 from over 10% at the beginning of the year.
As the trajectory of the US economy remains highly uncertain in the medium term, we could expect many US fashion companies to turn more conservative about placing new sourcing orders in the second half of 2022 to control inventory and avoid overstock.
Second, fashion companies struggled with hiking apparel sourcing costs driven by multiple factors.
The price index of US apparel imports reached 103.9 in June 2022 (January 2019=100), a 3.1% increase from a year ago and the highest since 2019. USITC data further shows that, of the over 200 types of apparel items (HS Chapters 61 and 62) at the six-digit code level, nearly 70% had a price increase in the first half of 2022 from a year ago, including almost 40% experiencing a price increase exceeding 10 percent.
According to the 2022 Fashion Industry Benchmarking Study recently released by the US Fashion Industry Association (USFIA), 100 percent of respondents expect their sourcing costs to increase in 2022, including nearly 40 percent expecting a substantial cost increase from a year ago. Further, respondents say that almost everything has become more expensive this year, from textile raw materials, shipping, and labor to the costs associated with compliance with trade regulations.
To make the situation even worse, the more expensive “cost of goods” resulted in heavier burdens of ad valorem import duties for US fashion companies. USITC data shows that in the first five months of 2022, US companies paid $6,117 million in tariffs for apparel imports (HS Chapters 61 and 62), a significant increase of 42.9% from a year ago. Of these import duties paid by US companies, about 30% (or $1,804 million) resulted from the controversial US Section 301 action against Chinese imports. Because of the Section 301 tariff action, the average applied US tariff rate for apparel imports also increased from 17.2% in 2018 to 18.7% in the first half of 2022.
Even though the US retail price index for clothing reached 102.7 in June 2022 (January 2019=100), the price increase was behind the import cost surge over the same period. In other words, given the intense market competition and weaker demand, US fashion companies couldn’t pass the sourcing cost increase to consumers entirely.
Third, US fashion companies continued to diversify their sourcing base in 2022, which benefited large-scale suppliers in Asia.
The Herfindahl–Hirschman index (HHI), a commonly-used measurement of market concentration, went down from 0.11 in 2021 to 0.10 in the first half of 2022, suggesting that US apparel imports came from even more diverse sources. Similarly, the CS3 index, measuring the total market shares of the top three suppliers (i.e., China, Vietnam, and Bangladesh), fell below 50% in the first half of 2022, the lowest since 2018.
The Asia region remains the dominant source of apparel for US fashion companies: about 74.4% of US apparel imports came from Asian countries in the first half of 2022 (by value), which has stayed stable for over a decade.
One critical factor behind the apparent “contradictory” phenomenon is US fashion companies’ intention to reduce their “China exposure” further. Notably, considering all primary sourcing factors, from cost, speed to market, production flexibility, agility, and compliance risks, relatively large-scale Asian suppliers are the most likely alternatives to “Made in China.” Thus, the CR5 index excluding China (i.e., the market shares of Vietnam, Bangladesh, Indonesia, India, and Cambodia) increased from 40.7% in 2021 to 45.5% in the first half of 2022.
Fourth, US fashion companies’ evolving China sourcing strategy is far more subtle and complicated than simply “moving out of China.”
US fashion companies doubled their efforts to reduce sourcing from China in 2022, particularly in response to the newly implemented Uyghur Forced Labor Prevention Act (UFLPA) and the growing geopolitical risks. For example, measured in value, only 13.2% of US cotton apparel imports (OTEXA code 31) came from China in the first half of 2022, which fell from 14.4% a year ago and much lower than nearly 30% back in 2017.
Industry sources indicate that US fashion companies are “upgrading” what they source from China, possibly to offset the Section 301 punitive tariffs. The structural change includes importing less basic apparel items (e.g., tops and bottoms) and more sophisticated and higher-valued categories (e.g., dresses). Also, US fashion companies increasingly source from China for apparel items sold in the high-end market. For example, measured by the number of Stock Keeping Units (SKU), about 94% of apparel labeled “Made in China” sold in the US retail market targeted the value segment in 2018. However, of those apparel “Made in China” newly launched to the US retail market between January and July 2022, less than 2% were in the value segment. Instead, items targeting the higher-priced premium and mass market segments surged from 5% to 64%. Another 33% of “Made in China” were luxury apparel items. In other words, US fashion companies no longer see China as a sourcing base for cheap low-end products. Their sourcing decisions regarding China would give more consideration to non-price factors.
Fifth,US apparel imports from the free trade agreements and trade preference programs partners stayed relatively stable in 2022 but lacked growth.
Despite the growing enthusiasm among US fashion companies for expanding near sourcing from the Western Hemisphere, the trade volume stayed stagnant. For example, in the first half of 2022, members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) accounted for 8.8% of US apparel imports in quantity and 9.9% in value, lower than a year ago (i.e., 9.9% in quantity and 11.1% in value). Likewise, Mexico also reported lower market shares in the US apparel import market in 2022. The results remind us that encouraging more US apparel sourcing from free trade agreements and preference program partners should go beyond offering preferential duty treatment.
Product diversification is a critical area that needs improvement, particularly regarding Western Hemisphere sourcing. For example, results show that US apparel sourcing from CAFTA-DR and Mexico generally concentrated on basic items such as tops and bottoms. In comparison, Asian countries, such as China, Vietnam, and Bangladesh, could offer much more diverse categories of products. This explains why US fashion companies treat large-scale Asian countries as their preferred alternatives to “Made in China” rather than moving sourcing orders to CAFTA-DR or Mexico.
Even though the ultimate goal is to expand US apparel sourcing from the Western Hemisphere, we need to make more efforts to practically and creatively solve the bottleneck of textile raw material supply facing garment producers in the region.
Zara (UK) sells plain trench coats “Made in Myanmar”
The prospect of Myanmar as an apparel sourcing base has been a hot-button issue since the country’s 2021 military coup. Notably, the labor-intensive apparel sector remained one of Myanmar’s largest employers and accounted for more than 30% of the country’s total exports in 2021 (UNComtrade, 2022). However, the military coup had also resulted in substantial job losses and growing concerns about the working conditions in Myanmar’s apparel sector.
Nevertheless, fashion companies’ Myanmar apparel sourcing strategy seems to evolve in 2022 in response to the shifting business environment, particularly the inflation factor and the need to reduce “China exposure.” Specifically:
First, data from UNComtrade shows that fashion brands and retailers continued to source apparel from Myanmar in 2022, although the practice varied by country.
While Myanmar’s apparel export suffered a notable decline in 2021, it somehow bounced back in 2022 (Jan-May). Among its top apparel export markets, Myanmar’s market shares stayed stable in the EU and the US, and it enjoyed a remarkable increase in Japan (i.e., back to the level before the military coup).
That being said, Mynammar’s market shares in the leading apparel import markets (e.g., US, EU, and Japan) remain tiny (less than 5%). Likewise, fashion brands and retailers typically treat Myanmar as a supplementary sourcing base as part of their overall sourcing diversification strategy.
Meanwhile, Myanmar is gradually diversifying its export market after the military coup. For example, over 8.5% of Myanmar’s apparel exports went to other Association of Southeast Asian Nations (ASEAN) members in 2021, up from only 3.0% in 2020 and 2.7% in 2019.
As a developing country, Myanmar relies on imported textile raw materials for its apparel production. In 2021, 97.3% of Myanmar’s imported textiles came from Asia, including 72% from China.
Second, Myanmar’s apparel export performance is associated with the level of trade-related sanctions imposed by the importing countries.
US has imposed the most significant sanctions since Myanmar’s 2021 military coup, such as suspending the 2013 Trade and Investment Framework Agreement (TIFA) and issuing the Business Advisory for Burma in January 2022. Not surprisingly, US fashion brands and retailers are among the most cautious about sourcing from Myanmar after the military coup. For example, in the 2022 USFIA Industry Benchmarking Study released in July 2022, only about 9.4% of respondents reported sourcing from Myanmar, much lower than 19% in 2020 before the military coup.
In comparison, the EU continues to allow apparel exports from Myanmar to enjoy duty-free benefits under the Everything But Arms (EBA) program. Likewise, without facing major trade-related sanctions, Myanmar’s apparel exports to Japan remain qualified for duty-free benefits under the Generalized System of Preferences Program for Least Developed Countries (as of April 1, 2022).
Third, from the business perspective, fashion companies commonly use Myanmar as a low-cost sourcing destination for specialized product categories, particularly outwear.
Outwear is the single largest category of products fashion companies sourced from Myanmar (around 37%).In comparison, fashion companies typically source tops and bottoms from Bangladesh and Vietnam.
Also, industry sources indicate that, on average, outwear “Made in Myanmar” (around $70/piece) is priced much lower than those sourced from China (over $200/piece) and Vietnam (over $150/piece) in the retail market (EU, US, and Japan).
As fashion companies struggled with the hiking sourcing costs in 2022 and the pressure of reducing China exposure further, Myanmar remains a reasonable sourcing destination to fulfill certain orders from the business perspective.
This study offers valuable input and practical policy recommendations from U.S. apparel companies’ perspectives regarding expanding U.S. apparel sourcing from CAFTA-DR members. For the study, we consulted executives at 27 leading U.S.-based apparel companies (note: 85% report having annual revenues exceeding $500 million; over 95% have been sourcing apparel from the CAFTA-DR region for more than ten years).
The results confirm that expanding U.S. apparel sourcing from CAFTA-DR could be the best chance to effectively create more jobs in Central America and solve the root causes of migration there. To achieve this goal, we need to focus on four areas:
First, improve CAFTA-DR’s apparel production capacity and diversify its product offers.
As many as 92 percent of respondents report currently sourcing apparel from CAFTA-DR members.
Highly consistent with the macro trade statistics, the vast majority of respondents (i.e., 60 percent) place less than 10 percent of their company’s total sourcing orders with CAFTA-DR members.
Whereas respondents rate CAFTA-DR members overall competitive in terms of “speed to market,” they express concerns about CAFTA-DR countries’ limited production capacity in making various products. As a result, U.S. companies primarily source basic fashion items like T-shirts and sweaters from the region. These products also face growing price competition with many alternative sourcing destinations.
Improving CAFTA-DR’s production capacity and diversifying product offers would encourage U.S. apparel companies to move more sourcing orders from Asia to the region permanently.
Second, practically solve the bottleneck of limited textile raw material supply within CAFTA-DR and do NOT worsen the problem.
The limited textile raw material supply within CAFTA-DR is a primary contributing factor behind the region’s stagnated apparel export volume and a lack of product diversification.
Notably, respondents say for their apparel imports from CAFTA-DR members, only 42.9% of fabrics, 40.0% of sewing threads, and 23.8% of accessories (such as trims and labels) can be sourced from within the CAFTA-DR area (including the United States). CAFTA-DR’s textile raw material supply problem could worsen as the U.S. textile industry switches to making more technical textiles and less so for apparel-related fabrics and textile accessories.
Maintaining the status quo or simply calling for making the CAFTA-DR apparel supply chain more “vertical” will NOT automatically increase the sourcing volume. Instead, allowing CAFTA-DR garment producers to access needed textile raw materials at a competitive price will be essential to encourage more U.S. apparel sourcing from the region.
Third, encourage more utilization of CAFTA-DR for apparel sourcing.
CAFTA-DR plays a critical role in promoting U.S. apparel sourcing from the region. Nearly 90 percent of respondents say the duty-free benefits provided by CAFTA-DR encourage their apparel sourcing from the region.
The limited textile supply within CAFTA-DR, especially fabrics and textile accessories, often makes it impossible for U.S. companies to source apparel from the region while fully complying with the strict “yarn-forward” rules of origin. As a result, consistent with the official trade statistics, around 31 percent of respondents say they sometimes have to forgo the CAFTA-DR duty-free benefits when sourcing from the region.
Respondents say the exceptions to the “yarn-forward” rules of origin, including “short supply,” “cumulation,” and “cut and assemble” rules, provide necessary flexibilities supporting respondents’ apparel sourcing from CAFTA-DR members. Around one-third of respondents utilize at least one of these three exceptions when sourcing from CAFTA-DR members when the products are short of meeting the strict “yarn-forward” rules of origin. It is misleading to call these exceptions “loopholes.”
Fourth, leverage expanded apparel sourcing to incentivize more investments in the CAFTA-DR region’s production and infrastructure.
U.S. apparel companies are interested in investing in CAFTA-DR to strengthen the region’s sourcing and production capacity. Nearly half of respondents explicitly say they will make investments, including “building factories or expanding sourcing or manufacturing capacities” in the CAFTA-DR region through 2026.
CAFTA-DR will be better positioned to attract long-term investments in its textile and apparel industry with a sound and expanded apparel sourcing volume.
The latest trade data shows that in the first four months of 2022, US apparel imports increased by 40.6% in value and 25.9% in quantity from a year ago. However, the seemingly robust import expansion is shadowed by the rising market uncertainties.
Uncertainty 1: US economy. As the US economic growth slows down, consumers have turned more cautious about discretionary spending on clothing to prioritize other necessities. Notably, in the first quarter of 2022, clothing accounted for only 3.9% of US consumers’ total expenditure, down from 4.3% in 2019 before the pandemic. Likewise, according to the Conference Board, US consumers’ confidence index (CCI) dropped to 106.4 (1985=100) in May 2022 from 113.8 in January 2022, confirming consumers’ increasing anxiety about their household’s financial outlook.
Removing the seasonal factor, US apparel imports in April 2022 went up 2.8% in quantity and 3.0% in value from March 2022, much lower than 9.3% and 11.9% a month ago (i.e., March 2022 vs. February 2022). The notable slowed import growth reflects the negative impact of inflation on US consumers’ clothing spending. According to the Census, the value of US clothing store sales marginally went up by 0.8% in April 2022 from a month ago, also the lowest so far in 2022.
Apparel import price index
Uncertainty 2: Worldwide inflation. Data from the Bureau of Economic Analysis shows that the price index of US apparel imports reached 103.1 in May 2022 (May 2020=100), up from 100.3 one year ago (i.e., a 2.8% price increase). At the product level (i.e., 6-digit HS Code, HS Chapters 61-62), over 60% of US apparel imports from leading sources such as China, Vietnam, Bangladesh, and CAFTA-DR experienced a price increase in the first quarter of 2022 compared with a year ago. The price surge of nearly 40% of products exceeded 10 percent. As almost everything, from shipping, textile raw materials, and labor to energy, continues to soar, the rising sourcing costs facing US fashion companies are not likely to ease anytime soon.
The deteriorating inflation also heats up the debate on whether to continue the US Section 301 tariff action against imports from China. Since implementing the punitive tariffs, US fashion companies have to pay around $1 billion in extra import duties every year, resulting in the average applied import tariff rate for dutiable apparel items reaching almost 19%. Although some e-commerce businesses took advantage of the so-called “de minimis” rule (i.e., imports valued at $800 or less by one person on a day are not required to pay tariffs), over 99.8% of dutiable US apparel imports still pay duties.
Uncertainty 3: “Made in China.” US apparel imports from China in April 2022 significantly dropped by 26.7% in quantity and 24.6% in value from March 2022 (seasonally adjusted). China’s market shares also fell to a new record low of 26.3% in quantity and 16.8% in value in April 2022. The zero-COVID policy and new lockdown undoubtedly was a critical factor contributing to the decline. Fashion companies’ concerns about the trajectory of the US-China relations and the upcoming implementation of the new Uyghur Forced Labor Prevention Act (UFLPA) are also relevant factors. For example, only 10.5% of US cotton apparel imports came from China in April 2022, a further decline from about 15% at the beginning of the year. Given the expected challenges of meeting the rebuttable presumption requirements in UFLPA and the high compliance costs, it is not unlikely that US fashion companies may continue to reduce their China exposure.
As US fashion companies source less from China, they primarily move their sourcing orders to China’s competitors in Asia. Measured in value, about 74.8% of US apparel imports came from Asia so far in 2022 (January-April), up from 72.8% a year ago. In comparison, there is no clear sign that more sourcing orders have been permanently moved to the Western Hemisphere. For example, in April 2022, CAFTA-DR members accounted for 9.3% of US apparel imports in quantity (was 10.8% in April 2021) and 10.2% in value (was 11.4% in April 2021).
Uncertainty 4: Shipping delays. Data suggests we are not out of the woods yet for shipping delays and supply chain disruptions. For example, as Table 2 shows, the seasonable pattern of US apparel imports in March 2022 is similar to January before the pandemic (2017-2020). In other words, many US fashion companies still face about 1.5-2 months of shipping delays. Additionally, several of China’s major ports were under strict COVID lockdowns starting in late March, including Shanghai, the world’s largest. Thus, the worsened supply chain disruptions could negatively affect the US apparel import volumes in the coming months.
Textile and apparel manufacturing in the U.S. has significantly shrunk in size over the past decades due to multiple factors ranging from automation, import competition to the shifting U.S. comparative advantages for related products. However, U.S. textile manufacturing is gradually coming back. The output of U.S. textile manufacturing (measured by value added) totaled $16.59 billion in 2021, up 23.8% from 2009. In comparison, U.S. apparel manufacturing dropped to $9.5 billion in 2019, 4.4% lower than ten years ago (Bureau of Economic Analysis, 2021).
Meanwhile, like many other sectors, U.S. textile and apparel production was hit hard by COVID-19 in the first half of 2020 but started to recover in the 3rd quarter. Notably, as of December 2021, U.S. textile production had returned to its pre-COVID level.
On the other hand, as the U.S. economy is turning more mature and sophisticated, the share of U.S. textile and apparel manufacturing in the U.S. Gross Domestic Product (GDP) dropped to only 0.12% in 2020 from 0.57% in 1998 (Bureau of Economic Analysis, 2021).
The U.S. textile and apparel manufacturing is changing in nature. For example, textile products had accounted for over 66% of the total output of the U.S. textile and apparel industry as of 2019, up from only 58% in 1998 (Bureau of Economic Analysis, 2020). Textiles and apparel “Made in the USA” are growing particularly fast in some product categories that are high-tech driven, such as medical textiles, protective clothing, specialty and industrial fabrics, and non-woven. These products are also becoming the new growth engine of U.S. textile exports. Notably, “special fabrics and yarns” had accounted for more than 34% of U.S. textile exports in 2019, up from only 20% in 2010 (Data source: UNComtrade, 2021).
Compatible with the production patterns, employment in the U.S. textile industry (NAICS 313 and 314) and apparel industry (NAICS 315) fell to the bottom in April-May 2020 due to COVID-19 but started to recover steadily since June 2020. From January 2021 to December 2021, the total employment in the two sectors increased by 4.5% and 4.2%, respectively (Seasonally adjusted). However, the employment level remains much lower than the pre-COVID level (benchmark: December 2019).
To be noted, as production turns more automated and thanks to improved productivity (i.e., the value of output per worker), U.S. textile and apparel factories have been hiring fewer workers even before the pandemic. The downward trend in employment is not changing for the U.S. textile and apparel manufacturing sector. Related, how to attract the new generation of workforce to the factory floor remains a crucial challenge facing the future of textile and apparel “Made in the USA.”
It is not rare to find clothing labeled “made in the USA with imported fabric” or “made in the USA with imported material” in the stores. Statistical analysis shows a strong correlation between the value of U.S. apparel output and U.S. yarn and fabric imports from 1998 to 2019.
Like many other developed economies whose textile and apparel industries had reached the stage of post-maturity, the United States today is a net textile exporter and net apparel importer. COVID-19 has affected U.S. textile and apparel trade in several ways:
Trade volume fell and yet fully recovered: Both affected by the shrinkage of import demand and supply chain disruptions, the value of U.S. textile and apparel imports dropped by as much as 19.3% in 2020 from a year ago, particularly apparel items (down 23.5%). Likewise, the value of U.S. textile and apparel exports in 2020 decreased by 15.6%, including an unprecedented 26% decrease in yarn exports. Further, thanks to consumers’ robust demand, the value of US apparel imports enjoyed a remarkable 27.4% growth in 2021 from a year ago and but was still 2.5% short of the level in 2019.
Trade balance shifted: Before the pandemic, U.S. was a net exporter of fabrics. However, as the import demand for non-woven fabrics (for making PPE purposes) surged during the pandemic, U.S. ran a trade deficit of $502 million for fabrics in 2020; the trade deficit expanded to $975 million in 2021. Meanwhile, as retail sales slowed and imports dropped during the pandemic, the U.S. trade deficit in apparel shrank by 19% in 2020 compared with 2019. However, the shrinkage of the trade deficit did not necessarily boost clothing “Made in the USA” in 2020, reminding us that the trade balance often is not an adequate indicator to measure the economic impact of trade.
No change in export market: More than 70% of U.S. textile and apparel export went to the Western Hemisphere in 2021, a pattern that has stayed stable over the past decades (OTEXA, 2022). More can be done to strengthen the Western Hemisphere supply chain and textile and apparel production in the region by leveraging regional trade agreements like CAFTA-DR and USMCA.
Japan has one of the world’s largest apparel consumption markets, with retail sales totaling USD$100bn in 2021, only after the United States (USD$476bn) and China (USD$411bn). Meanwhile, like many other developed economies, most apparel consumed in Japan are imported, making the country a considerable sourcing and market access opportunity for fashion companies and sourcing agents around the globe.
Japanese fashion companies primarily source apparel from Asia. Data shows that Japanese fashion brands and retailers consistently imported more than 90% of clothing from the Asia region, much higher than their peers in the US (about 75%), the EU (50%), and the UK (about 60%). This pattern reflects Japan’s deep involvement in the Asia-based textile and apparel supply chain.
Notably, Japan’s apparel imports from Asia often contain textile raw materials “made in Japan.” Data shows that in 2021, about 65% of Japan’s yarn exports, 75% of woven fabric exports, and 90% of knit fabric exports went to the Asia region, particularly China and ASEAN members. Understandably, in Japan’s apparel retail stores, it is not rare to find clothing labeled “made in China” or “Made in Vietnam” but include phrases like “high-quality luster unique to Japanese fabrics” and “with Japanese yarns” in the product description.
The Global value chain analysis further shows that of Japan’s $5.32 billion gross textile exports in 2017, around 34% (or $1.79 billion) contributed to export production in other economies, mainly China ($496 million), Vietnam ($288 million), South Korea ($98 million), and Taiwan ($92 million).
China remains Japan’s top apparel supplier at the country level. However, Japanese fashion brands and retailers have been diversifying their sourcing base. Since the elimination of the quota system in 2005, China, for a long time, was the single largest apparel supplier for Japan, with an unparalleled market share of more than 80% measured by value. However, as “Made in China” became more expensive, among other factors, China’s market share dropped to 56.4% in 2021. Japanese fashion brands and retailers actively seek China’s alternatives like their US and EU counterparts. Notably, Japan’s apparel imports from Vietnam, Bangladesh, and Indonesia have grown particularly fast, even though their production capacity and market shares are still far behind China’s.
As Japanese fashion companies source from more places, the total market shares of the top 5 apparel suppliers, not surprisingly, had dropped from over 94% back in 2010 to only 82.3% in 2021, measured by value. Similarly, the Herfindahl-Hirschman Index (HHI), commonly used to calculate market concentration, dropped from 0.64 in 2011 to 0.35 in 2021 for Japan’s apparel imports. In other words, Japanese fashion companies’ apparel sourcing bases became ever more diverse.
Fast Retailing Group’s apparel sourcing base (Data source: Open Apparel Registry)
We can observe the same pattern at the company level. For example, the Fast Retailing Group, the largest Japanese apparel retailer which owns Uniqlo, used to source nearly 100% of its products from China. However, as of 2021, the Fast Retailing Group sourced finished apparel from over 550 factories in more than 20 countries. While about half of these factories were in China, the Fast Retailing Group had strategically developed production capacity in Vietnam, Bangladesh, Indonesia, and India. On the other hand, in April 2021, the Fast Retailing Group opened a 3D-knit factory in Shinonome, allowing the company to re-shoring some production back to Japan.
Additionally, Japan is a member of the Regional Comprehensive Economic Partnership (RCEP), the world’s most economically influential free trade agreement. Notably, Japan commits to reducing its apparel import tariffs to zero for RCEP members following a 21-year phaseout schedule. However, as Table 8 shows, Japan’s tariff cut for apparel products is more generous toward ASEAN members and less for China and South Korea due to competition concerns. For example, by 2026, Japan’s average tariff rate will be reduced from 9.1% today to only 1.9% for apparel imports from ASEAN members but will remain above 6% for imports from China. Given the tariff difference, it can be highly expected that ASEAN members such as Vietnam could become more attractive sourcing destinations for Japanese fashion companies.
The full study is available here(need Just-Style subscription)
By leveraging production and trade statistics from government databases, we examined the critical trends of US textile manufacturing and supply. Particularly, we try to understand the strengths and weaknesses of the United States as a textile raw material supplier for domestic garment manufacturers and those in the Western Hemisphere. Below are the key findings:
First, fiber, yarn, and thread manufacturing is a long-time strength in the US, whereas fabric production is much smaller in scale. Specifically, fiber, yarn, and thread (NAICS 31311) accounted for nearly 18% of US textile mills’ total output in 2019. In comparison, less than 13% of the production went to woven fabrics (NAICS 31321) and only about 5% for knit fabrics (NAICS 31324).
Second, the US textile industry shifts to make more technical textiles and less apparel-related yarns, fabrics, and other raw materials. Data shows that from 2015 to 2019, the value of US fiber, yarn, and thread manufacturing (NAICS code 31311) dropped by as much as 16.8 percent. Likewise, US broadwoven fabric manufacturing (NAICS code 31321) and knit fabric (NAICS code 31324) decreased by 2.0 percent and 2.7 percent over the same period. Labor cost, material cost, and capital expenditure are critical factors behind the structural shift of US textile manufacturing.
Third, the structural change of US textile manufacturing directly affects the role of the US serving as a textile supplier for domestic apparel producers and those in the Western Hemisphere.
On the one hand, the US remains a critical yarns and threads supplier in the Western Hemisphere. For example, from 2010 to 2019, the value of US fibers, yarn and threads exports (NAICS31311) increased by 25%, much higher than other textile categories. Likewise, in 2021, fibers, yarns, and threads accounted for about 23.3% of US textile exports, higher than 21.0% in 2010. Additionally, nearly 40% of Mexico and CAFTA-DR members’ yarn imports in 2021 (SITC 651) still came from the US, the single largest source. This trend has stayed stable over the past decade.
On the other hand, the US couldn’t sufficiently supply fabrics and other textile accessories for garment producers in the Western Hemisphere, and the problem seems to worsen. Corresponding to the decline in manufacturing, US broadwoven fabric (NAICS 31321) and knit fabric (NAICS 31324) exports decreased substantially.
The US also plays a declining role as a fabric and textile accessories supplier for garment factories in the Western Hemisphere. Garment producers in Mexico and CAFTA-DR members had to source 60%-80% of woven fabrics and 75-82% of knit fabrics from non-US sources in 2021. Likewise, only 40% and 14.6% of Mexico and CAFTA-DR members’ textile accessories, such as labels and trims, came from the US in 2021.
Likewise, the limited US fabric supply affects the raw material sourcing of domestic apparel manufacturers. For example, according to the “Made in the USA” database managed by the Office of Textiles and Apparel (OTEXA), around 36% of US-based apparel mills explicitly say they use “imported material,” primarily fabrics.
The study’s findings echo some previous studies suggesting that textile raw material supply, especially fabrics and textile accessories, could be the single most significant bottleneck preventing more apparel “Made in the USA” and near-sourcing from the Western Hemisphere.
Meanwhile, how to overcome the bottleneck could trigger heated public policy debate. For example, US policymakers could encourage an expansion of domestic fabric and textile accessories manufacturing as one option. However, to make it happen takes time and requires substantial new investments. Also, economic factors may continue to favor technical textiles production over apparel-related fabrics in the US.
As an alternative, US policymakers could make it easier for garment producers in the Western Hemisphere to access their needed fabrics and textile accessories outside the US, such as improving the rules of origin flexibility in CAFTA-DR or USMCA. But this option is likely to face strong opposition from US yarn producers and be politically challenging to implement.
(About the authors: Dr Sheng Lu is an associate professor in fashion and apparel studies at the University of Delaware; Anna Matteson is a research assistant in fashion and apparel studies at the University of Delaware).
As US fashion companies diversify their sourcing from Asia, near-sourcing from the Western Hemisphere, particularly members of the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) seems to benefit. According to the latest trade data from the Office of Textiles and Apparel (OTEXA), US apparel companies placed relatively more sourcing orders with suppliers in the Western Hemisphere in 2021. For example, CAFTA-DR members’ market shares increased by 0.31 percentage points in quantity and nearly one percentage point in value compared with a year ago.
However, it is concerning to see the utilization rate of CAFTA-DR for apparel sourcing fall to a new record low of only 73.7% in 2021. This means that as much as 26.3% of US apparel imports from CAFTA-DR members did NOT claim the duty-free benefits.
The lower free trade agreement (FTA) utilization rate became a problem, particularly among CAFTA-DR members with fast export growth to the US market in 2021. For example, whereas US apparel imports from Honduras enjoyed an impressive 45.6% growth in 2021, only 72.6% of these imports claimed the CAFTA-DR duty benefits, down from 82.3% a year ago. We can observe a similar pattern in El Salvador, Nicaragua, and the Dominican Republic.
The phenomenon is far from surprising, however. For years, US fashion companies have expressed concerns about the limited textile supply within CAFTA-DR, especially fabrics and textile accessories. The lack of textile supply plus the restrictive “yarn-forward” rules of origin in the agreement often creates a dilemma for US fashion companies: either source from Asia entirely or source from CAFTA-DR but forgo the duty-saving benefits.
Likewise, because of a lack of sufficient textile supply within the region, US apparel imports from CAFTA-DR members become increasingly concentrated on basic fashion items, typically facing intense competition with many alternative sourcing destinations. For example, measured in value, over 80% of US apparel imports from CAFTA-DR members in 2021 were shirts, trousers, and underwear. However, US companies import the vast majority (70%-88%) from non-CAFTA-DR sources for these product categories.
Understandably, it will be unlikely to substantially expand US apparel sourcing from CAFTA-DR members without solving the textile supply shortage problem facing the region.
In December 2021, Just-Style consulted a panel of industry leaders and scholars in its Outlook 2022–what’s next for apparel sourcing briefing. Below is my contribution to the report. All comments and suggestions are more than welcome!
What next for apparel sourcing?
As “COVID sets the agenda” and the trajectory of several critical market and non-market forces hard to predict (for example, global inflation, and geopolitics), fashion companies may still have to deal with a highly volatile and uncertain market environment in 2022. That being said, it is still hopeful that fashion companies’ toughest sourcing challenges in 2021 will start to gradually ease at some point in the new year, including the hiking shipping costs, COVID-related lockdowns, and supply chain disruptions.
In response to the “new normal,” fashion companies may find several sourcing strategies essential:
One is to maintain a relatively diverse apparel sourcing base. The latest trade data suggests that US, EU, and Japan-based fashion companies have been steadily sourcing from a more diverse group of countries since 2018, and such a trend continues during the pandemic. Echoing the pattern, in the latest annual benchmarking study I conducted in collaboration with the United States Fashion Industry Association (USFIA), we find that “China plus Vietnam plus many” remains the most popular sourcing model among respondents. This strategy means China and Vietnam combined now typically account for 20-40 percent of a fashion company’s total sourcing value or volume, a notable down from 40-60 percent in the past few years. Fashion companies diversify their sourcing away from “China plus Vietnam” to avoid placing “all eggs in one basket” and mitigate various sourcing risks. In addition, more than 85 percent of surveyed fashion companies say they will actively explore new sourcing opportunities through 2023, particularly those that could serve as alternatives to sourcing from China.
The second strategy is to strengthen the relationship with key vendors further. As apparel is a buyer-driven industry, fashion brands and retailers fully understand the importance of catering to consumers’ needs. However, the supply chain disruptions caused by COVID-19 remind fashion companies that building a close and partner-based relationship with capable suppliers also matters. For example, working with vendors that have a presence in multiple countries (or known as “super-vendors”) offers fashion companies a critical competitive edge to achieve more flexibility and agility in sourcing. Sourcing from vendors with a vertical manufacturing capability also allows fashion companies to be more resilient toward supply chain disruptions like the shortage of textile raw materials, a significant problem during the pandemic.
Further, we could see fashion companies pay even closer attention to textile raw material sourcing in the year ahead. On the one hand, given the growing concerns about various social and environmental compliance issues like forced labor, fashion brands and retailers are making more significant efforts to better understand their entire supply chain. For example, in addition to tracking who made the clothing or the fabrics (i.e., tier 1 & 2 suppliers), more companies have begun to release information about the sources of their fibers, yarns, threads, and trimmings (i.e., tier 3 & tier 4 suppliers). On the other hand, many fashion brands and retailers intend to diversify their textile material sourcing from Asia, particularly China, against the current business environment. Compared with cutting and sewing garments, much fewer countries can make textiles locally, and it takes time to build textile production capacity. Thus, fashion companies interested in taking more control of their textile raw material sourcing need to take concrete actions such as shifting their sourcing model and making long-term investments intentionally.
Apparel industry challenges and opportunities
One key issue we need to watch closely is the US-China relations. China currently remains the single largest source of apparel globally, with no near alternative. China also plays an increasingly significant role as a textile supplier for many leading apparel exporting countries in Asia. However, as the US-China relations become more concerning and confrontational, we could anticipate new trade restrictions targeting Chinese products and products from any sources that contain components made in China. Notably, with strong bipartisan support, President Biden signed into law the Uyghur Forced Labor Prevention Act on December 23, 2021. The new law is a game-changer! Depending on the detailed implementation guideline to be developed by the Customs and Border Protection (CBP), US fashion companies may find it not operationally viable to source many textiles and apparel products from China. In response, China may retaliate against well-known western fashion brands, disrupting their sales expansion in the growing Chinese consumer market. Further, as China faces many daunting domestic economic and political challenges, a legitimate question for fashion companies to think about is what an unstable China means for their sourcing from the Asia-Pacific region and what the contingency plan will be.
Another critical issue to watch is the regional textile and apparel supply chains and related free trade agreements. While apparel is a global sector, apparel trade remains largely regional-based, i.e., countries import and export products with partners in the same region. Data shows that from 2019 to 2020, around 80% of Asian countries’ textile and apparel imports came from within Asia and about 50% for EU countries. Over the same period, over 87% of Western Hemisphere (WH) countries’ textile and apparel exports went to other WH countries and about 75% for EU countries.
Notably, the reaching and implementation of new free trade agreements will continue to alter and shape new regional textile and apparel supply chains in 2022 and beyond. For example, the world’s largest free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), officially entered into force on January 1, 2022. The tariff reduction and the very liberal rules of origin in the agreement could strengthen Japan, South Korea, and China as the primary textile suppliers for the Asia-based regional supply chain and enlarge the role of ASEAN as the leading apparel producer. RCEP could also accelerate other trade agreements in the Asia-Pacific region, such as the China-South Korea-Japan Free Trade Agreement currently under negotiation.
As one of RCEP’s ripple effects, we can highly anticipate the Biden administration to announce its new Indo-pacific economic framework soon to counterbalance China’s influences in the region. The Biden administration also intends to leverage trade programs such as the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) to boost textile and apparel production, trade, and investment in the Western Hemisphere and address the root causes of migration. These trade initiatives will be highly relevant to fashion companies that could use the opportunity to expand near sourcing, take advantage of import duty-saving benefits and explore new supply chains.
Additionally, fashion companies need to be more vigilant toward political instability in their major sourcing destinations. We have already seen quite a turmoil recently, from Myanmar’s military coup, Ethiopia’s loss of the African Growth and Opportunity Act (AGOA) benefits, concerns about Haiti and Nicaragua’s human rights, and the alleged forced labor in China’s Xinjiang region. Whereas fashion brands and retailers have limited or no impact on changing a country’s broader human rights situation, the reputational risks could be very high. Having a dedicated trade compliance team monitoring the geopolitical situation routinely and ensuring full compliance with various government regulations will become mainstream among fashion companies.
And indeed, sustainability, due diligence, recycling, digitalization, and data analytics will remain buzzwords for the apparel industry in the year ahead.
The Regional Comprehensive Economic Partnership (RCEP)is a free trade agreement between ten member states of the Association of Southeast Asian Nations (ASEAN)* and five other large economies in the Asia-Pacific region (China, Japan, South Korea, New Zealand, and Australia). RCEP was reached on November 15, 2020, after nearly eight years of tough negotiation. (Note: ASEAN members include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. India was an original RCEP member but decided to quit in late 2019 due to concerns about competing with Chinese products, including textiles and apparel.)
So far, RCEP is the world’s largest trading bloc. As of 2019, RCEP members accounted for nearly 26.2% of world GDP, 29.5% of world merchandise exports, and 25.9% of world merchandise imports.
As of November 1, 2021, Lao, Burnei, Cambodia, Singapore and Thailand (ASEAN members), as well as China, Japan, New Zealand and Australia have ratified the agreement. This has met the minimum criteria for RCEP to enter into force (i.e., six members, including at least three ASEAN members and three non-ASEAN members).
Why RCEP matters to the textile and apparel industry?
RCEP matters significantly for the textile and apparel (T&A) sector. According to statistics from the United Nations, in 2019, the fifteen RCEP members altogether exported US$374 billion worth of T&A (or 50% of the world share) and imported US$139 billion (or 20% of the world share).
In particular, RCEP members serve as critical apparel-sourcing bases for many US and EU fashion brands. For example, in 2019, close to 60% of US apparel imports came from RCEP members, up from 45% in 2005. Likewise, in 2019, 32% of EU apparel imports also came from RCEP members, up from 28.1% in 2005.
Notably, RCEP members have been developing and forming a regional textile and apparel supply chain. More economically advanced RCEP members (such as Japan, South Korea, and China) supply textile raw materials to the less economically developed countries in the region within this regional supply chain. Based on relatively lower wages, the less developed countries typically undertake the most labor-intensive processes of apparel manufacturing and then export finished apparel to major consumption markets worldwide.
As a reflection of an ever more integrated regional supply chain, in 2019, as much as 72.8% of RCEP members’ textile imports came from other RCEP members, a substantial increase from only 57.6% in 2005. Nearly 40% of RCEP members’ textile exports also went to other RCEP members in 2019, up from 31.9% in 2005.
What are the key provisions in RCEP related to textiles and apparel?
First, RCEP members have committed to reducing the tariff rates to zero for most textile and apparel traded between RCEP members on day one after the agreement enters into force. That being said, the detailed tariff phaseout schedule for textile and apparel products under RCEP is very complicated. Each RCEP member sets their own tariff phaseout schedule, which can last more than 20 years (for example, 34 years for South Korea and 21 years for Japan.) Also, different from U.S. or EU-based free trade agreements, the RCEP phaseout schedule is country-specific. For example, South Korea sets different tariff phaseout schedules for textile and apparel products from ASEAN, China, Australia, Japan, and New Zealand. Japan’s tariff cut for apparel products is more generous toward ASEAN members and less so for China and South Korea (see the graph above). Companies interested in taking advantage of the duty-free benefits under RCEP need to study the “rules of the game” in detail.
Second, in general, RCEP adopts very liberal rules of origin for apparel products. It only requires that all non-originating materials used in the production of the good have undergone a tariff shift at the 2-digit HS code level (say a change from any chapters from chapters 50-60 to chapter 61). In other words, RCEP members are allowed to source yarns and fabrics from anywhere in the world, and the finished garments will still qualify for duty-free benefits. Most garment factories in RCEP member countries can immediately enjoy the RCEP benefits without adjusting their current supply chains.
What are the potential economic impacts of RCEP on the textile and apparel sector?
On the one hand, the implementation of RCEP is likely to further strengthen the regional textile and apparel supply chain among RCEP members. Particularly, RCEP will likely strengthen Japan, South Korea, and China as the primary textile suppliers for the regional T&A supply chain. Meanwhile, RCEP will also enlarge the role of ASEAN as the leading apparel producer in the region.
On the other hand, as a trading bloc, RCEP could make it even harder for non-RCEP members to get involved in the regional textile and apparel supply chain formed by RCEP members. Because an entire regional textile and apparel supply chain already exists among RCEP members, plus the factor of speed to market, few incentives are out there for RCEP members to partner with suppliers from outside the region in textile and apparel production. The tariff elimination under the RCEP will put textile and apparel producers that are not members of the agreement at a more significant disadvantage in the competition. Not surprisingly, according to a recent study, measured by value, only around 21.5% of RCEP members’ textile imports will come from outside the area after the implementation of the agreement, down from the base-year level of 29.9% in 2015.
Further, the reaching of RCEP could accelerate the negotiation of other trade agreements in the Asia-Pacific region, such as the China-South Korea-Japan Free Trade Agreement. We might also see growing pressures on the Biden administration to join the Comprehensive and Progressive Agreement of the Trans-Pacific Partnership (CPTPP) to strengthen the US economic ties with countries in the Asia-Pacific region. The economic competition between the United States and China in the area could also intensify as the combined effects of RCEP and CPTPP begin to shape new supply chains and test the impacts of the two countries on the regional trade patterns.
Data shows that 15.2% of US apparel imports came from USMCA and CAFTA-DR members YTD in 2021 (January-August), higher than 13.7% in 2020 and about 14.7% before the pandemic (2018-2019). Notably, CAFTA-DR members’ market shares increased to 11% in 2021 (January to Aug) from 9.6% in 2020. The value of US apparel imports from CAFTA-DR also enjoyed a 54% growth in 2021 (January—Aug) from a year ago, faster than 25% of the world’s average.
#2 Sourcing apparel from USCMA and CAFTA-DR members helps US fashion brands and retailers save around $1.6-1.7 billion tariff duties annually. (note: the estimation considers the value of US apparel imports from USMCA and CAFTA-DR members at the 6-digit HTS code level and the applied MFN tariff rates for these products; we didn’t consider the additional Section 301 tariffs US companies paid for imports from China). Official trade statistics also show that measured by value, about 73% of US apparel imports under free trade agreements came through USMCA (25%) and CAFTA-DR (48%) from 2019 to 2020.
#3 US apparel imports from USMCA and CAFTA-DR members do NOT necessarily focus on items subject to a high tariff rate. Measured at the 6-digit HS code level, apparel items subject to a high tariff rate (i.e., applied MFN tariff rate >17%) only accounted for about 8-9% of US apparel imports from USMCA members and 7-8% imports from CAFTA-DR members. In comparison, even having to pay a significant amount of import duties, around 17% of US apparel imports from Vietnam and 10% of imports from China were subject to a high tariff rate (see table below).
The phenomenon suggests that USCMA and CAFTA-DR members still have limited production capacity for many man-made fibers(MMF) clothing categories (such as jackets, swimwear, dresses, and suits), typically facing a higher tariff rate. This result also implies that expanding production capacity and diversifying the export product structure could make USMCA and CAFTA-DR more attractive sourcing destinations.
#4 US apparel imports from USMCA and CAFTA-DR members tend to focus on large-volume items subject to a medium tariff rate. Specifically, from 2017 to 2021 (Jan-Aug), ten products (at the 6-digit HTS code level) typically contributed around half of the US tariff revenues collected from apparel items (HS chapters 61-62). However, the average applied MFN tariff rates for these items were only about 13%. Meanwhile, these top tariff-revenue-contributing apparel items accounted for about 50% of US apparel imports from USMCA members and nearly 64%-69% of imports from CAFTA-DR members.
Likewise, the top ten products (at the 6-digit HTS code level) typically accounted for 65%-68% of US apparel imports from USMCA members and nearly 73-75% of US apparel imports from CAFTA-DR members. These products also had a medium average applied MFN rate at 11-12% for USMCA and 12-13% in the case of CAFTA-DR.
Given the duty-saving incentives, expanding “near-sourcing” from USMCA and CAFTA-DR members could prioritize these large-volume apparel items with a medium tariff rate in short to medium terms. However, in the long run, a shortcoming of this strategy is that many such items are basic fashion clothing that primarily competes on price (such as T-shirts and trousers) and cannot leverage the unique competitive edge of near-sourcing (such as speed to market). When the US reaches new free trade agreements, particularly those involving leading apparel-producing countries in Asia, it could offset the tariff advantages enjoyed by USMCA and CAFTA-DR members and quickly result in trade diversion.
As one breaking news, on 16 September 2021, China officially presented its application to join the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). While the approval of China’s membership in CPTPP remains a long shot and won’t happen anytime soon, the debate on the potential impact of China’s accession to the trade agreement already starts to heat up.
Like many other sectors, textile and apparel companies are on the alert. Notably, China plus current CPTPP members accounted for nearly half of the world’s textile and apparel exports in 2020. Many non-CPTPP countries are also critical stakeholders of China’s membership in the agreement. In particular, the Western Hemisphere textile and apparel supply chain, which involves the US textile industry, could face unrepresented challenges once China joins CPTPP.
First, once China joins CPTPP, the tariff cut could provide strong financial incentives for Mexico and Canada to use more Chinese textiles. China is already a leading textile supplier for many CPTPP members. In 2019, as much as 47.7% of CPTPP countries’ textile imports (i.e., yarns, fabrics, and accessories) came from China, far more than the United States (12.1%), the other leading textile exporter in the region.
Notably, thanks to the Western Hemisphere supply chain and the US-Mexico-Canada Trade Agreement (USMCA, previously NAFTA), the United States remains the largest textile supplier for Mexico (48.2%) and Canada (37.2%). Mexico and Canada also serve as the largest export market for US textile producers, accounting for as many as 46.4% of total US yarn and fabric exports in 2020.
However, US textile exporters face growing competition from China, offering more choices of textile products at a more competitive price (e.g., knitted fabrics and man-made fiber woven fabrics). From 2005 to 2019, US textile suppliers lost nearly 20 percentage points of market shares in Mexico and Canada, equivalent to what China gained in these two markets over the same period.
Further, China’s membership in CPTPP means its textile exports to Mexico and Canada could eventually enjoy duty-free market access. The significant tariff cut (e.g., from 9.8% to zero in Mexico) could make Chinese textiles even more price-competitive and less so for US products. This also means the US textile industry could lose its most critical export market in Mexico and Canada even if the Biden administration stays away from the agreement.
Second, if both China and the US become CPTPP members, the situation would be even worse for the US textile industry. In such a case, even the most restrictive rules of origin would NOT prevent Mexico and Canada from using more textiles from China and then export the finished garments to the US duty-free. Considering its heavy reliance on exporting to Mexico and Canada, this will be a devastating scenario for the US textile industry.
Even worse, the US textile exports to CAFTA-DR members, another critical export market, would drop significantly when China and the US became CPTPP members. Under the so-called Western-Hemisphere textile and apparel supply chain, how much textiles (i.e., yarns and fabrics) US exports to CAFTA-DR countries depends on how much garments CAFTA-DR members can export to the US. In comparison, US apparel imports from Asia mostly use Asian-made textiles. For example, as a developing country, Vietnam relies on imported yarns and fabrics for its apparel production. However, over 97% of Vietnam’s textile imports come from Asian countries, led by China (57.1%), South Korea, Taiwan, and Japan (about 25%), as opposed to less than 1% from the United States.
The US textile industry also deeply worries about Vietnam becoming a more competitive apparel exporter with the help of China under CPTPP. Notably, among the CPTPP members, Vietnam is already the second-largest apparel exporter to the United States, next only to China. Despite the high tariff rate, the value of US apparel imports from Vietnam increased by 131% between 2010 and 2020, much higher than 17% of the world average. Vietnam’s US apparel import market shares quickly increased from only 7.6% in 2010 to 16.6% in 2020 (and reached 19.3% in the first half of 2021). The lowered non-tariff and investment barriers provided by CPTPP could encourage more Chinese investments to come to Vietnam and further strengthen Vietnam’s competitiveness in apparel exports.
Understandably, when apparel exports from China and Vietnam became more price-competitive thanks to their CPTPP memberships, more sourcing orders could be moved away from CAFTA-DR countries, resulting in their declined demand for US textiles. Notably, a substantial portion of US apparel imports from CAFTA-DR countries focuses on relatively simple products like T-shirts, polo shirts, and trousers, which primarily compete on price. Losing both the USMCA and CAFTA-DR export markets, which currently account for nearly 70% of total US yarns and fabrics exports, could directly threaten the survival of the US textile industry.
FASH455 Global Apparel & Textile Trade and Sourcing 