The US-China dispute over trade and subsequent imposition and counter-imposition of tariffs is all set to disturb the global textiles and apparel industry, writes Subir Ghosh
The ongoing hostilities between the United States (US) and China can upset existing equations and force new alignments in the global textiles and apparel industry. Assuming, of course, both countries stick to their guns till the end of May when the new tariffs imposed by the Trump administration on Chinese imports set in, and the counter-tariffs of China come into play. Till then, the global textiles and apparel industry would have little to do but wait and watch the game of who-blinks-first.
This, however, is more than just an eyeball-to-eyeball confrontation, and had been expected-with varying certainties, of course-since Day One. US President Donald Trump's views about Chinese domination of global manufacturing was well known, but his assertive action has come more than a year after he took over the presidency. The US withdrawal from the Trans Pacific Partnership (TPP), nevertheless, had been immediate. But in case of China, Trump bid his time, preparing ground through jingoistic rhetoric. The first sign that the US would take China head on came in February. Thereafter, it was only a matter of time before the war of words would escalate into a trade war.
The First Salvo
President Trump on April 3 released a long-winding list of Chinese imports that his administration intended to target as part of a crackdown on what he believed to be unfair trade practices. The sectors covered by the proposed tariffs included products used for robotics, information technology, communication technology and aerospace.
The US Trade Representative (USTR), which announced the list, said it was targeting products that benefit China's industrial plans "while minimising the impact on the US economy." The tariffs were directed at Chinese policies that "coerce" American companies into transferring technology and intellectual property to local Chinese companies. The US was expected to levy tariffs on $50 billion to $60 billion of Chinese imports annually.
The official announcement underlined that the total value of imports subject to the tariff increase would be equal to "the harm caused by China's unreasonable technology transfer policies." The official note remarked, "The Trade Representative proposes an additional duty of 25 per cent on a list of products from China." The American list included over 1,300 imported products.
The Chinese reaction was immediate. The very next day, it announced additional tariffs on 106 US products. This was in addition to 128 other US export products that had been listed earlier by China. The effective start date for the new tariffs has not been announced, though China's ministry of commerce made it amply clear that the tariffs were designed to target up to $50 billion of US products annually. Though the American list had not included apparel and footwear, the sigh of relief that industry had heaved on April 3 did not last long-the Chinese list included cotton.
Trump's decision went down well with his voters, but industry was not pleased. Certainly not the American Apparel and Footwear Association. Its president and CEO Rick Helfenbein reacted the same day, "We are pleased with the administration's decision to avoid adding tariffs to US imports of apparel, footwear, and travel goods from China. At the same time, we are concerned that the list includes tariffs on machinery used in our domestic manufacturing process. This would directly raise costs on domestic manufacturers and impact our ability to grow Made in USA."