Trump Tariffs and the Impact to Apparel Imports to the US

Trump Tariffs and the Impact to Apparel Imports to the US

Is Donald Trump serious about tariffs? This has been the question hanging over not just world markets but the whole world of economics. According to the US National Retail Federation, such tariffs would significantly impact the costs of a wide range of consumer products sold in the United States.

Specifically to apparel, consumers could see prices surge by 12.5% while in footwear they would rise by 18.1%. This would result in a loss of consumer spending power of $13.9bn and $6.4bn respectively.

The prices of apparel would increase by 12.5% to 20.6%, and consumers would cut back spending on apparel by 22% to 33%, as per the NRF.

The U.S. tariffs on Chinese goods have created significant growth opportunities for Vietnam’s textile and apparel industry, allowing it to capture a larger share of the U.S. market.

Vietnam’s share of U.S. apparel imports has grown significantly, driven by this shift in sourcing. This increased demand has helped many Vietnamese textile manufacturers grow and expand their operations, particularly in categories like apparel, footwear, and accessories that traditionally dominated Chinese exports.

In terms of price pressures and profit margin squeeze, Vietnamese manufacturers often face pressure to keep prices competitive, which can compress profit margins, especially as production costs rise due to higher input costs from China and capacity pressures.

Bangladesh heavily relies on the US market. Any increase in import tariffs on Bangladeshi garments could lead to higher prices for consumers in the US, potentially reducing demand and impacting the profitability of both US retailers and Bangladeshi manufacturers.

Exporters of Bangladesh fear that a Trump presidency could also lead to challenges for multilateral trading institutions like the WTO and intensified global export competition.

Last year, Bangladesh exported $8.27 billion worth of garment items to the US, facing a 15.62 percent tariff.

During Trump’s presidency from 2017 to 2021, Bangladesh’s share of garment exports to the US fluctuated between 17 percent and 18.90 percent, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

On the other hand, if the U.S. imposes higher tariffs on Chinese goods, many U.S. retailers and brands have sought alternative suppliers to avoid tariff costs. This has led to a surge in demand for Bangladeshi apparel, as brands look to diversify their sourcing away from China.

Bangladesh, already a top apparel supplier to the U.S., has seen some positive impact as it benefits from its relatively low labor costs and established manufacturing infrastructure.

A renowned garment exporter to the USA from Bangladesh said Trump’s anti-China move could eventually benefit Bangladesh. If he imposes more tariffs on Chinese products, there is a possibility of work orders shifting to Bangladesh.

On the other hand, while the U.S. tariffs on other countries like China have presented new opportunities for Bangladesh’s apparel industry, there are several potential negative impacts as well.

If the U.S. imposes tariffs on Bangladeshi products, or if consumer demand shifts, Bangladesh’s apparel sector could face sudden order reductions and revenue loss.

As Bangladesh is not getting GSP facilities from the US, so without GSP, Bangladeshi apparel exports face standard tariffs in key markets, which makes them relatively more expensive compared to competitors who have duty-free access.

For example, countries like Cambodia, Pakistan, and several African nations enjoy duty-free access to the U.S. or EU under various trade agreements, putting Bangladesh at a disadvantage.

Before Trump’s administration, Bangladesh imposed a 25 percent tariff on Chinese goods in January 2018, Chinese exporters faced a 3.08 percent duty on garment exports to the US.

According to the Hong Kong Ministerial Declaration of the World Trade Organization (WTO), the US was supposed to provide duty-free market access for all products from LDCs. However, the US government granted duty-free access to only 97 percent of products.

Trump’s victory introduces new variables for apparel suppliers and brands that rely heavily on global supply chains.

With potential shifts in trade policies, increased tariffs, and currency fluctuations, the apparel industry must brace for changes that could reshape sourcing strategies, impact profitability, and ultimately alter pricing structures for American consumers.

Source: National Retail Federation