Saturday 21 / December / 2024
New Delhi: In a significant shift in global trade dynamics, the United States has steadily reduced its garment imports from China over the past decade.
This decline, spurred by the US-China trade war and concerns over China's human rights violations, has opened doors for other Asian countries to expand their presence in the American apparel market.
According to a recent report by the United States International Trade Commission (USITC), China—once the dominant supplier of garments to the US—saw its market share plummet by 16.4 percent between 2013 and 2023.
In contrast, nations like Vietnam, Bangladesh, India, and Cambodia have emerged as major beneficiaries of this shift.
China's dominance in the US apparel market was once unassailable. Its large-scale production capabilities, efficient supply chains, and competitive pricing made it the go-to source for American retailers.
However, several factors have eroded China's market share over the past decade.
US-China trade war: The trade war, which began in 2018 under the Trump administration, imposed tariffs on hundreds of billions of dollars' worth of Chinese goods, including apparel.
These tariffs significantly increased the cost of importing garments from China, prompting US companies to explore alternative sourcing options.
Human rights concerns: Reports of forced labour in China's Xinjiang region, where a significant portion of the country’s cotton is produced, have drawn widespread condemnation.
In response, the US enacted the Uyghur Forced Labor Prevention Act in 2021, banning imports of goods made with forced labour from Xinjiang.
This legislation further dis-incentivised American companies from sourcing garments from China.
Rising labour costs: As China’s economy has matured, wages have risen, making it less competitive compared to other low-cost garment-producing nations in Asia.
While China's loss has been significant, it has provided opportunities for other Asian countries to increase their exports to the US.
These nations have leveraged their strengths to fill the gap left by China.
Vietnam: Vietnam has been the biggest beneficiary, solidifying its position as a top supplier to the US apparel market.
The country's proximity to China has allowed it to capitalise on existing supply chain infrastructure while offering lower costs.
Additionally, Vietnam has signed free trade agreements with key global partners, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which enhances its competitiveness.
Bangladesh: Known for its expertise in producing ready-made garments, Bangladesh has expanded its foothold in the US market by offering competitive pricing and large-scale production capabilities.
Investments in sustainability and compliance with international labour standards have further boosted its appeal to American buyers.
India: India has emerged as a strong contender, especially in categories like cotton apparel and textiles.
Government initiatives such as the Production Linked Incentive (PLI) scheme and a focus on enhancing manufacturing capacity have enabled Indian exporters to seize opportunities created by China's declining market share.
Cambodia: Cambodia’s garment sector has also seen growth, and the credit goes to preferential trade agreements and competitive labour costs.
Despite challenges like limited infrastructure, the country has managed to attract US buyers seeking alternatives to China.
The redistribution of market share among Asian countries has far-reaching implications for the global apparel industry.
Diversification of supply chains: US companies have increasingly adopted a "China plus one" strategy, diversifying their supply chains to reduce dependence on a single country.
This trend not only mitigates risks associated with geopolitical tensions but also ensures greater resilience against disruptions like the Covid-19 pandemic.
Increased competition among exporters: With more countries vying for a larger slice of the US apparel market, competition among Asian exporters has intensified.
This has encouraged nations to invest in improving quality, sustainability, and compliance standards.
Focus on sustainability: Sustainability has become a key focus area for US retailers, who are under growing pressure from consumers and regulators to adopt ethical sourcing practices.
Countries like Bangladesh and India have responded by investing in green technologies and sustainable manufacturing processes, further enhancing their appeal.
The Trump factor: Uncertainty ahead
As Donald Trump is all set to begin his new tenure in January 2025, after the historic election win, experts are closely watching how his administration might impact US-China trade relations and the broader apparel market.
Renewed tariffs and trade restrictions: Trump’s first term was marked by a hardline approach to China, including the imposition of tariffs that disrupted global trade flows.
As he will be returning to office, similar policies could further accelerate the decline in US garment imports from China, benefiting alternative suppliers in Asia.
Focus on domestic manufacturing: Trump’s "America First" policy emphasised boosting domestic manufacturing.
While it is unlikely that the US will become a major garment producer due to high labour costs, policies encouraging reshoring could impact import patterns.
Heightened scrutiny on human rights: A Trump administration might continue or even intensify scrutiny of China’s human rights practices, leading to stricter regulations on imports from the country.
This could further pressure US companies to pivot away from Chinese suppliers.
However, there are challenges for emerging exporters in Asia.
While countries like Vietnam, Bangladesh, India, and Cambodia have successfully increased their market share, they face several challenges in maintaining and expanding their foothold, which include infrastructure limitations, geopolitical risks, compliance costs, etc.
The decline in US garment imports from China marks a pivotal shift in global trade dynamics, driven by geopolitical tensions, human rights concerns, and economic factors.
While this has created opportunities for other Asian countries, the road ahead is fraught with challenges, from infrastructure bottlenecks to compliance pressures.
For now, Vietnam, Bangladesh, India, and Cambodia are reaping the benefits of this transition, showcasing the importance of adaptability and resilience in navigating the complexities of global trade.
(ENDS)
