• Linkdin

Key global apparel trade shifts to watch post Trump's inauguration

19 Jan '25
8 min read
Key global apparel trade shifts to watch post Trump's inauguration
Pic: Adobe Stock

Insights

  • Donald Trump's return to office is set to reshape US trade policies, with steep tariff hikes on Chinese imports and other exporting nations.
  • Apparel imports, which peaked under both Trump and Biden, face uncertainty.
  • Inflation concerns may lead to prices of clothing rise by 20 per cent.
  • Vietnam, Bangladesh, and India could benefit from China's losses, but trade barriers remain a challenge.
As Donald Trump prepares for his upcoming inauguration as the 47th President of the United States on January 20, 2025, his stance on tariff policies remains a central focus, particularly regarding trade with China and other global partners. Trump has long championed protectionist measures, emphasising tariffs as a tool to reduce trade deficits, boost domestic manufacturing, and safeguard American jobs.

In his second term, President Trump is expected to continue with aggressive tariff strategies, especially on Chinese imports, potentially raising tariffs further or introducing new trade barriers. These policies are likely to have significant impacts on industries like textiles, where the US relies heavily on imports from countries such as China, Bangladesh, and Vietnam.

While the intent is to strengthen American production and reduce dependency on foreign goods, the result could lead to higher prices for US consumers, particularly in sectors like apparel, where price sensitivity is high. Trump’s tariff policies may also provoke retaliatory actions from other countries, disrupting global supply chains and creating a challenging environment for both consumers and businesses. As Trump takes office again, the future of US trade relationships, particularly with China, will undoubtedly remain a contentious and impactful aspect of his economic agenda. However, it is not only China that will be affected—collateral damage will also be observed among major apparel-exporting economies.

Exhibit 1: Apparel imports of the US over the years (in $ bn)

Source: ITC Trademap

Trump was first elected as US President in 2017 and completed his four-year tenure in early 2021, with the Biden administration replacing him in January 2021. If we observe apparel import trends between the two administrations, both administrations saw similar trends, with apparel imports peaking during their mid-tenure. The Trump administration brought a negligible dip in apparel imports compared to the first year of the Biden administration when apparel imports saw a growth of 23 per cent. This increase could be attributed to several factors, including pent-up demand in the US following the COVID-19 pandemic and the reopening of global economies. President Biden’s relatively positive stance on multilateral trade relations with other countries has likely contributed to strengthening international trade and economic growth.

Exhibit 2: Apparel imports in CY 2023 (Jan-Nov) and CY 2024 (Jan-Nov) (in $ bn)

Source: ITC Trademap

Currently, apparel imports for CY 2024 (January–November) stand at $77.07 billion compared to the previous year’s $75.87 billion. However, apparel import numbers will be more interesting to observe in CY 2025, given Trump’s new policies for the coming years. Analysis of consumer demand trends, as well as America’s expected increase in domestic production due to Trump’s policies, will give a complete picture of the extent of dependence on other countries for textiles and apparel.

According to several reports, Trump’s current policy direction is expected to lead to a spike in inflation in the US economy. Trump’s continued insistence on increasing tariff rates on China and other exporting economies is sure to push inflation higher, limiting consumer choices in the textile and apparel category. While the US would have to increase its domestic production, particularly for finished goods like apparel, higher tariffs would harm intermediate goods that the US requires to produce the final product. The combination of rising inflation and increased dependence on US-produced goods will not bode well for the apparel industry, which is price-sensitive and a discretionary spending category.

Expected Consumer Sentiment During the Trump Administration

A University of Michigan’s survey shows that consumers’ one-year inflation expectations jumped to 3.3 per cent in January—the highest level since May—from 2.8 per cent in December. Consumer sentiment is likely to decline due to tariff increases coupled with high interest rates. Consumers are unlikely to expect much from domestic entrepreneurs, given the sky-high interest rates designed to restore the economy to normal levels.

There appears to be a general downturn in consumer spending across all categories, including major and minor expenses, as well as investments. This does not bode well for the global textile and apparel industry, given the US’s role as a major customer.

Apparel items such as jeans, T-shirts, and sweatshirts are likely to experience price increases. The US imports over 80 per cent of its clothing, predominantly from countries such as China, Bangladesh, and Vietnam. According to projections by the National Retail Federation (NRF), the implementation of tariffs could lead to a 20 per cent rise in clothing prices. This means that a $50 cotton sweater might increase to $60, while the price of men’s jeans could rise from $80 to $96.

Table 1: Unit rates for apparels pre and post tariff imposition (in $)

Source: TexPro, F2F Analysis

*Please note that the values are calculated assuming that there would be a 20 per cent hike on the unit prices for apparel.

The US might use subsidies to offset the overall effect of retaliatory tariffs imposed by other nations in response to increased US tariff rates.

Impact on China, Mexico and Canada

President-elect has proposed a 60 per cent tariff increase on Chinese imports, and according to some reports, tariff rates could reach a staggering 100 per cent, posing a significant threat to the Chinese economy. However, the impact will extend beyond China, affecting various economies both positively and negatively.

Mexico and Canada have also come under the purview of increased tariffs from their NAFTA partner. China, which has previously leveraged FDI investments to enter sectors such as textiles and apparel in Mexico, will struggle to penetrate the US market due to the presence of ‘Mexican apparel’ made by Chinese companies. Many small-scale Chinese industries have reported a need to find alternative export destinations, but none match the profitability of the US market.

Exhibit 3: China’s spot exchange rate from CY 2023 to current (in Yuan)

Source: FRED (Federal Reserve Economic Data)

Currency Depreciation and Its Effects

Exhibit 3 shows a clear trend of depreciation in the value of the Chinese Yuan (CNY) against the US Dollar (USD) over the past year, particularly during critical periods such as the US election season in November 2024. In early November 2024, the exchange rate stood at around 7.23 CNY per USD, but by December 2024, it had risen to approximately 7.30 CNY per USD, reflecting a noticeable depreciation of the Yuan. The spot exchange rate reached 7.33 CNY per USD in early January 2025, indicating continued weakness.

This depreciation means that US consumers and businesses must spend more dollars to purchase Chinese goods, which is a negative for US importers. However, for China, this currency depreciation makes exports cheaper for foreign buyers, potentially boosting exports to the US and other countries. The depreciating Yuan during the US election period could have been influenced by market uncertainty surrounding future US trade policies, particularly anticipated tariffs and potential trade tensions under the new administration. As the Yuan loses value, Chinese manufacturers may remain competitive globally by offering more affordable products despite economic uncertainties.

Potential Beneficiaries of China’s Apparel Market Loss

Several countries could take up a significant portion of China’s apparel exports and avoid the blanket 20 per cent tariff.

Vietnam

  • Potential: Vietnam might emerge as a winner, particularly in the apparel segment, due to its Free Trade Agreement with the US and its continued good relations with the country.
  • Concerns: China could redirect production facilities to Southeast Asia, including Vietnam, to bypass US tariffs. However, Vietnam’s large trade surplus with the US could make it a target for scrutiny. Trump may revisit trade agreements, including Rules of Origin clauses.

Bangladesh

  • Potential: Bangladesh remains a key supplier to the US, which is also its largest Foreign Direct Investment partner. This relationship is expected to continue.
  • Concerns: Bangladesh faces risks of tariff and non-tariff barriers, particularly on ready-made garments, which are highly susceptible to stricter US regulations.

India

  • Potential: According to the Confederation of Indian Textile Industry (CITI), the Trump administration could benefit Indian apparel exporters as the US seeks new suppliers. India has the potential to capture around 15 per cent of China’s lost apparel exports.
  • Concerns: India’s primary concern is tariffs, as its unit production costs are already higher than those of China, Vietnam, and Bangladesh.

Apparel Exporting Nations in the Spotlight

Several Southeast Asian countries, including Indonesia, Cambodia, and Pakistan, have consistently been among the top 10 apparel suppliers to the US. Cambodia and Pakistan stand out due to their compound annual growth rates (CAGR) of 7 per cent and 8 per cent, respectively, from 2018–2023. Indonesia, however, has seen stagnant growth, with exports hovering around $5 billion over the past decade.

Way Forward

The escalating tariffs under the Trump administration will significantly disrupt global apparel trade, creating both opportunities and challenges. While countries such as Vietnam, Bangladesh, and India could benefit from China’s decline in the US apparel market, they must navigate trade agreements, tariff policies, and production constraints.

To mitigate the effects of these tariffs, US companies could diversify supply chains, invest in domestic production, and foster trade partnerships. Additionally, targeted subsidies or incentives could help stabilise the apparel industry and minimise the impact of inflation on the retail sector.

Fibre2Fashion News Desk (NS)

Leave your Comments

Esteemed Clients

Woolmark Services India Pvt. Ltd.
Weitmann & Konrad GmbH & Co. KG
VNU Exhibitions Asia
USTER
UBM China (Shanghai)
Tuyap Tum Fuarcilik Yapim A.S.
TÜYAP IHTISAS FUARLARI A.S.
Tradewind International Servicing
Thermore (Far East) Ltd.
The LYCRA Company Singapore  Pte. Ltd
Thai Trade Center
Thai Acrylic Fibre Company Limited
X
Advanced Search