Supply Chain Dive is reporting that “rising production and sourcing costs and protectionist trade policies are fashion companies’ top business challenges in 2019.” These facts are based on a report from the US Fashion Industry Association. According to the report, the number of companies holding a positive five-year outlook dropped from 84% in 2018 to 64% in 2019.
So what’s behind these survey statistics you ask:
- Due to tariffs and ongoing “trade war” with China, 83% of the fashion industry respondents said they plan to reduce their sourcing from China, up from 67% in 2018.
- However, only 6.7% of survey respondents said they planned to “reduce sourcing significantly.”
- Half of the respondents reported their Chinese vendors actually lowered prices in an attempt to keep from losing customers to Vietnam, currently the alternative manufacturing country of choice.
- In 2018, American fashion brands paid more than $12 Billion in tariffs on apparel and textiles and another $3 Billion on footwear.
It is quite clear from this industry report that the current “trade war” with China is the main reason behind these negative results. The US and China will resume serious trade talks this week, two months after negotiations broke down.
Tariff hikes for all commodities have been negatively affecting exporters from both sides of the Pacific. In fact, China’s imports of American goods fell 31.4% in June from a year ago while exports to the United States fell 7.8%.
China previously agreed to reduce its trade surplus with the United States by purchasing more American soybeans, natural gas as well as other products, but revoked that pledge after one of the recent US tariff hikes.
So where do we go from here? It is anyone’s guess as this virtual chess match between the US and China continues.
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