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The Rise of the Second Tier of Jeans-Making Countries Marks a Key Sourcing Shift

The year is shaping up as the decline of the powerhouses denim hubs and the rise of a new tier of major jeans suppliers.

China and Mexico–long the top two manufacturers of denim jeans imported into the U.S., have posted just minor increases so far this year, while Asian countries including Vietnam, Bangladesh, Cambodia and Pakistan have taken up the slack. Western Hemisphere countries like Colombia, Guatemala and Nicaragua have also seen consistent gains.

The thirst for jeans remains strong. U.S. imports of denim apparel—98 percent of which is jeans—increased 7.87 percent for the first 10 months of the year, in value terms, to $3.24 billion compared to the same period in 2017.

But where denim is produced is what’s changing.

U.S. jeans imports from China rose just 2.91 percent for the year through October to $790.89 million worth of goods, compared to the year-ago period, while shipments from Mexico inched up 1.61 percent in the same timeframe to $679.41 million.

The common denominator for both countries has been a disruption in U.S. trade policy that created uncertainty among brands and retailers, causing them to shift sourcing plans to limit their risk.

In the case of China, it’s been tariff wars with the Trump Administration that has the potential to substantially raise prices if the threat of 25 percent tariffs comes to fruition next year. For Mexico, it was the renegotiations of the North America Free Trade Agreement, which came to a close, and the new U.S.-Mexico-Canada Agreement now awaits Congressional approval.

Bo Dean, senior vice president of sales and marketing at Twin Dragon Denim Mills, said at the recent Kingpins New York trade show, “Tell me what the benefits of a trade war are? At least let us know exactly what to expect so we know the rules we need to operate under. Maybe doesn’t cut it for running a business.”

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Dean and other executives at the show noted that what’s happened as a result of the trade war, and actual and threatened tariffs, is that China has lost jeans market share mostly to other Asian nations. However, a lot of Chinese fabrics are now being exported to countries like Vietnam and Cambodia to make apparel, since they don’t have a textile base.

China and Mexico are also more mature and, therefore, costly economies than many of the nations competing for denim market share, including Vietnam, which saw shipments to the U.S. rise 46.16 percent in the 10 months to $248.95 million, and Bangladesh, with imports to the U.S. up 12.78 percent to $481.41 million.

Other Asian suppliers seeing gains include Pakistan, with imports rising 12.52 percent to $206.05 million; Cambodia, with shipments up 27.49 percent to $99.08 million; and India, posting a 44.59 percent hike to $31.35 million.

Those Western Hemisphere suppliers able to take market share from Mexico since they have the same attributes of quick shipping times and duty-free trade, include the members of the Central American Free Trade Agreement (CAFTA). U.S. jeans imports from CAFTA countries rose 7.37 percent in the 10 months to $116.37 million worth of goods. Leading the way were Nicaragua, with shipments to the U.S. increasing 6.97 percent to $87.81 million, and Guatemala, which posted a 16.99 percent gain to $26.9 million.

U.S. jeans imports from Sub-Saharan Africa countries that are part of the African Growth & Opportunity Act (AGOA) preferential trade program increased 12.96 percent in the period to $127.63 million, led by Lesotho’s 6.14 percent gain to $67.31 million, Madagascar’s 16.55 percent hike to $20 million, Kenya’s 67.87 percent increase to $15.73 million and Tanzania’s 20.2 percent rise to $9.66 million. Egypt, which is not part of AGOA, but has also grown into a key jeans supplier, saw its shipments increase 2.23 percent to $128.05 million.