U. S. importers are worried. Fashion stores are really scared.
Some say that the Chinese typhoon will pass.
Others say it hasn’t arrived yet.
Years of nonviolent coexistence between the business and political circles of the U. S. -China equation are rapidly crumbling. A recent Gallup poll indicates that only about 15% of Americans still have a favorable view of China, and that number actually makes stores stop, especially at a time when Capitol Hill is filled with anti-China rhetoric. As the temperature rises in Congress, China (for its part) deserves to make more efforts to calm the waters. Somehow, somewhere, between the spy balloon and TikTok, there has been Indeed, when negative sentiment reaches the average American (as recent Gallup numbers show), trouble is brewing. The mood on the main American streets changes (in cinematic terms) from: “The Russians are coming” to “China Syndrome”.
American fashion stores remain concerned about the Chinese industry scenario, simply because about 37% of all clothing imports still come from China. While the average American buys 69 items of clothing a year (and 7 pairs of shoes), where will the products be?What will happen if China becomes a lesser option?Brand stores, for their part, also proclaim the desire to sell their products in China to capture part of its 1,400 million inhabitants. Retail is knowing that the scenario in China as a whole may have a forked tongue somewhere, or that American stores are simply jumping straight into the eye of the storm.
Three and a half years ago, former President Donald Trump tweeted that “our major U. S. companies have been ordered to depart immediately to make a decision toward China. “At the time, no one in the industry knew exactly what to do with your return. However, it goes without saying that the former president rocked the boat and did indeed notify it. However, years later, nothing has changed. In fact, the fashion industry is still fascinated in China.
Questions continue to arise: why price lists (Trump’s famous ones) were bad for retail trade and why they accelerated US inflation. The fact is that American consumers care little about price lists and price lists. They know how much they are willing to pay for a garment and that’s it. Clothing duties (taxes) have been around for 90 years, since the Smoot-Hawley Act went into effect (before the Great Depression). Before Trumpian price lists were added, the average tariff rate for maximum products was 1. 45%, but it is already 11% on average for the fashion industry. When former President Trump talked about adding 25 or 15% to the original amount of Chinese imports, alarm bells temporarily sounded. In general, customs procedures for many pieces amounted to 7. 5%, although this is in addition to what is already paid. These prices are still maintained today and the influx of fashion from China has not slowed down at all. In general, considering all imports from China to the United States, the figures ranged between:
432 billion dollars in 2020 for
$506 billion in 2021 for
$536 billion in 2022
China and the fashion industry have been working in combination for many years. China really understands the retail mentality in the United States and is able to deliver wonderful quality on time. So, with all the stress of leaving (and all the additional taxes), why is the fashion industry hesitant to leave the Chinese space? Well, for one thing, the US government continues to send a mixed message on the “exit” issue. It is very easy for experts to believe that an industry manufactures all clothing in the United States, but the truth is that only 3% of the total market is manufactured in the United States, which means that 97% is still imported.
To get out of China, corporations deserve to take advantage of industrial incentives that compensate for the lack of productivity of painters. If, for example, a painter in China can sew only 50 garments a day, some other country could sew only 10. Trade agreements were signed to make up the difference, providing the product duty-free to the United States, but this is not the case. I’m not telling the whole story. Mexico, for example, under the USMCA and Central America under CAFTA-DR are industrial agreements that work well (although factories in those countries prefer giant runs of commodity parts), so China has built its reputation on small batches of complex parts. Another opportunity to escape the Chinese-centric matrix was to embrace the African productive sector, which prospered for a time thanks to the African Growth and Opportunity Act (AGOA). Several corporations established a base in Ethiopia, and a civil war ensued. Unfortunately, the U. S. ended AGOA efforts in Ethiopia, forcing brands to quickly revert to their Chinese roots.
In addition to industry agreements, some brands have also used preferential systems such as the Generalized System of Preferences (GSP) to produce fashion accessories (such as handbags and backpacks) outside of China, in countries such as Cambodia and Indonesia. however, it failed to renew the program in 2021, just as the industry moves away from China. Some brands in those categories have already thought about turning around and returning to China.
The truth is that although the U. S. government encourages fashion stores to leave China, it continually blocks outlets by failing to renew or pursue new industrial agreements that are much needed to be competitive. Biden’s leadership likes to talk about competing with China. However, the industry wants to be attentive to the rhetoric. China, for its part, can do more for relations and make them more positive. After all, a fair festival and a smart market for both parties would be welcome in fashion retail.
However, time is running out to curb the problem. The recent Gallup poll (as mentioned above) indicates that 84% of Americans have a negative opinion of China (45% a very unfavorable opinion and 39% an unfavorable opinion). With figures as bad as these, anything has to be temporarily replaced or, according to Murphy’s Law: “if something can go wrong, it will happen”.