With the US elections in focus, there is growing speculation about the potential impact of Donald Trump and Kamala Harris, should either be elected as President, on the textile industry in the United States. The industrial policies of both candidates differ significantly, yet their stances on trade policies appear to show little divergence. Understanding these policies is crucial, as they will likely shape the future of the US textile sector and its role in global trade.

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Both candidates have expressed a desire to ban Chinese imports in the United States. However, there are no studies assessing the impact of such a ban on the US textile industry, which heavily relies on Chinese imports for raw materials like yarn, fibre, and fabrics.

The United States has signed free trade agreements with Caribbean nations to import textiles and apparel at a duty-free rate. Additionally, the country has the NAFTA agreement with Mexico and Canada. Mexico, one of the major textile manufacturers in the region, depends significantly on raw material imports from China for its production. As a result, any ban or imposition of higher tariffs on Chinese imports, particularly textiles, could have a significant impact not only on the US textile industry but also on other countries linked to this supply chain. These trade restrictions could ripple through the entire North American textile sector, affecting manufacturing costs and market dynamics.

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Contrasting approaches of the candidates

If trade is used as a measure to compare the potential effects of the two candidates on trade growth, the overall trend appears similar. During the single terms of both Biden and Trump as Presidents of the United States, trade followed a more or less consistent pattern, with only the magnitude differing.

Therefore, it becomes essential to examine trade and trade policies during the tenures of both candidates. Over the past 12 years, exports have increased by an average of 2 per cent, while imports have increased by an average of 5 per cent during the same period. Given that the US is experiencing a growing trade deficit, none of the policies implemented thus far have been successful in systematically reducing this widening gap.

Under his 'Make America Great Again' (MAGA) agenda, Trump resorted to protectionism, trade wars, and retaliatory tariffs in an attempt to reduce the US deficit. However, the deficit continued to widen, only decreasing temporarily due to the COVID-19 crisis and the resultant supply chain disruptions.

Exhibit 1: US’ gross exports (in $ bn and %)

                                     Source: ITC Trademap                                                       

Where Trump used direct legal requirements to restrict imports and rein in the increasing deficits, many policies, such as Section 301 and other higher tariffs on China, have been maintained by the Biden administration. Although the Biden administration appears to be different, the approach is indirectly the same. While Trump resorted to imposing tariffs on all US imports, Biden and Kamala Harris, on the other hand, have not entered into any Free Trade agreements nor shown interest in joining the Trans-Pacific Partnership Free Trade Agreement (TPP). The result—a combination of the unchanged Trump-era tariffs and the Biden administration’s reluctance to engage in any new Free Trade agreements—was that the deficit in 2023 showed only a very minor uptick.

Exhibit 2: US’ gross imports (in $ bn and %)

Source: ITC Trademap, F2F analysis

However, the impact on the textile industry—which relies on the import of raw materials—could be significant if no alternatives are found for manufacturing these raw materials in the US. After analysing the import data of textiles, it is evident that, along with woven and knitted garments, the country imports a large volume of home textiles, specialised laminated textile fabrics, and nonwovens, all of which are raw materials used as intermediaries in the production process. The country is highly specialised in the production of technical textiles, and as a result, imports of these intermediaries have been increasing at a CAGR of 4 per cent over the past 12 years.

Table 1: CAGR of textile imports by category in the US (in %)

Source: ITC Trademap, Author’s analysis

However, there is a catch. With both presidential candidates, Trump and Harris, aiming to stop imports from China, the textile industry may be the most affected. After analysing the data, it was found that the country still imports a significant amount of textile raw materials and value-added materials from China. Although the CAGR over the past twelve years is now negative, indicating a gradual decline in imports from China, the largest share of imports still comes from China. Despite the declining trend, China remains the top exporter of textile raw materials to the US.

Table 2: CAGR of US’ imports from China (in %)

Source: ITC Trademap, F2F analysis

If Donald Trump returns to the White House, manufacturing in the country could be severely impacted, affecting job creation and eventually disrupting the entire supply chain. Given that Trump is likely to impose tariffs, including blanket tariffs on imports from Chinese companies, the textile sector could be the hardest hit. Although the US has trade agreements like CAFTA-DR and NAFTA, imports from these regions, particularly in textiles, are increasing, yet China remains the top supplier of textile goods to the US.

Textile trade under Biden

None of the candidates are prepared to pursue Free Trade Agreements for textile imports or merchandise trade in general. Adopting an anti-China policy and investing in US manufacturing and industries has not produced significant positive results for the economy. Under Biden, textile exports rose by 20 per cent in 2022 but fell by 14 per cent in 2023. During the Trump administration, textile exports experienced a decline on average.

Exhibit 3: Textile exports under Biden (in $ bn)

Source: ITC Trademap, F2F analysis

When viewed in terms of CAGR, textile exports experienced a boost under the Biden administration, growing at a CAGR of 2 per cent, which is higher compared to the entire four-year period of the Trump administration, as well as the Obama administration. Exports dropped significantly during the Trump administration, with only a minor increase. This decline was primarily due to the sudden increase in tariffs on Chinese imports and the implementation of Section 301, which left key suppliers without the necessary materials for textile manufacturing.

Exhibit 4: Textile exports under Trump (in $ bn)

Source: ITC Trademap, F2F analysis

The tariff on apparel in the US is as high as 32 per cent, and the anti-China policy is not benefitting the US textile industry. Although both candidates – Trump and Harris – hold anti-China stances, their approaches differ and could impact the textile industry in distinct ways. The retail industry has already faced a notable rise in commodity prices due to the sharp increase in the cost of imported footwear and apparel in the US. However, Trump continues to advocate for the same tariff structure, including a blanket tariff, which could be damaging, especially as the US opted out of the Trans-Pacific Partnership.

Even though exports to Mexico and Canada are increasing, these markets cannot fully compensate for the loss of Chinese exports.

Trade policies and their impact on the textile industry

Both candidates' policies present potential challenges for the textile industry, though in different ways. Harris supports raising middle-class incomes and increasing corporate taxes, which could drive up production costs for textile companies. Trump, by contrast, favours lowering corporate taxes but advocates for higher tariffs on imports to encourage domestic production, which could disrupt supply chains and increase the cost of imported raw materials.

Table 3: Policies: Harris vs Trump

Source: Oxford Economics, F2F Analysis

In one way or another, these policies are likely to affect consumers in similar ways. If Harris is elected as President, there will be a focus on increasing the incomes of US middle-class households, which could lead to higher retail spending and potentially stimulate local manufacturing over time. However, higher corporate taxes could discourage domestic manufacturers, and these costs might be passed on to consumers.

On the other hand, while Trump plans to reduce corporate taxes, he is also considering imposing a blanket ban on imports into the US. This could boost domestic manufacturing, but raising tariffs on imports would likely increase production costs, leading to higher prices for consumers in apparel and footwear.

Thus, to summarise; regardless of who wins the presidency, the impact on the US textile industry remains uncertain. The key issue is the need for the US to engage in more free trade agreements (FTAs) and market access programmes to ensure that US-manufactured materials reach key apparel-producing nations. For example, while Vietnam exports large amounts of apparel to the US, its imports of US textile materials are limited. Only Mexico and Canada import significant amounts of US textile raw materials and value-added products.

For the textile industry to thrive, both candidates must be open to pursuing trade agreements with other nations, rather than relying on protectionism or maintaining the current status quo.

What next?

The current US policies are not benefitting the textile industry as intended. The previous administration maintained the status quo on tariffs and refrained from signing new free trade agreements (FTAs), and both current candidates appear to follow a similar path—one focusing on tariffs and the other on boosting consumer income while maintaining existing tariffs.

The core issue, however, lies in the administration’s inability to secure agreements with nations that could use US-origin textile products in their manufacturing. Simply banning Chinese products or imposing higher tariffs on Chinese goods is not a viable solution in the current context. The textile industry recently saw some relief with the US Federal Reserve reducing interest rates, but this is not a long-term fix.

The real solution for the textile industry is to ensure that more countries use US-manufactured textile goods in their production, as outlined in agreements like CAFTA-DR and USMCA. However, with both candidates showing reluctance to pursue meaningful steps towards greater market access, merely increasing local manufacturing will not be sufficient without stronger demand.

As a result, the textile industry and exports may remain stagnant until the next president takes office and makes decisive changes.

Fibre2Fashion News Desk (KL)