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Saturday, June 22, 2019

Trade War Effects Fashion Industry

Good or bad for business?
A trade war is a situation in which countries try to damage each other's trade, typically by the imposition of tariffs or quota restrictions.


China and the United States have been engaged in a trade war through increasing tariffs and other measures since 2018.

September 17, 2018. The US announced its 10% tariff on $200 billion worth of Chinese goods would begin on September 24, 2018, increasing to 25% by the end of the year. They also threatened tariffs on an additional $267 billion worth of imports if China retaliates, which China promptly did on September 18 with 10% tariffs on $60 billion of US imports.

May 5, 2019. Trump stated that the previous tariffs of 10% levied in $200 billion worth of Chinese goods would be raised to 25% on May 10. With notification by USTR, the Federal Register on May 9 published the modification of duty on or after 12:01 a.m. Eastern Time Zone May 10 to 25% for the products of China covered by the September 2018 action.

Can the fashion industry survive a 25% tariff on top of the tariffs that we already pay?

Learn more about Fashion Industry Economics.

What countries benefit?  Possibly Bangladesh, Vietnam, and others.  The fashion industry will alter the supply chain with the goal of maintaining the lowest possible costs.  This might lead buyers out of China and into other countries.
However, moving from one country to another is not always a simple task.  It takes several months if not years to get a new factory up to speed.  Clothing companies work with factories for several years developing relationships, production processes, trust, etc.  The USA wholesalers & retailers purchasing product from factories in China have spent years developing a well oiled machine.  Both the US companies as well as the China clothing factories have put a great deal of time, money & effort into developing their business.

On a consumer level, think about the jeans and t-shirts you are wearing. The cost of these good are likely to go up.

Lesson for consumers:

1) Tariffs are a tax on clothing, footwear, accessories, etc., when imported into the United States.

2) The importer (company in the United States), pays the Tariff to the United States government.

3) Because the importer pays more money to import the product, they then charge more money when they sell the product.

4) In other words, the cost goes up and someone has to pay.  Ultimately, portion of the cost goes to the consumer.

Reality: The factory will absorb some of the cost, the importer will absorb some of the cost, the consumer will absorb some of the cost.  When cost increases, "everyone" pays.  So who benefits?  Well, do you remember where the tariff money goes?  Yes, it is a tax that goes to the government.

Yes, the global trade war that is currently going on between the United States & China most certainly has an effect on the fashion industry.  Short term effects as well as long term effects.  Some positive, some negative.

The Harmonized Tariff Schedule is what helps the apparel industry determine duty rates.  The Harmonized Tariff Schedule of the United States Annotated (HTSA) provides the applicable tariff rates and statistical categories for all merchandise imported into the United States; it is based on the International Harmonized System, the global system of nomenclature that is used to describe most world trade in goods.


Learn about fashion industry duty rates.

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