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US Apparel Import Growth From China Flattens as Companies Limit Risks

The volatile state of U.S. apparel sourcing–dramatically impacted by the tariff-fueled trade war with China–has caused significant shifts in where goods are being manufactured.

The bottom line: China’s decade’s long growth has come to a halt and its Asian neighbors are rapidly gaining ground as major suppliers, while the Western Hemisphere is holding its own for quick-turn, more local production for U.S. importers.

Apparel imports from China for the year through April were essentially flat (up 0.3 percent) in value to $7.25 billion worth of goods, according to data released Thursday by the Commerce Department’s Office of Textiles & Apparel (OTEXA). That’s a far cry from the double-digit gains sustained for many years, before the turn of events in the last year or so. While sourcing experts point to the U.S-China trade war and need to limit risks, China’s economic and trade policies have also de-emphasized exports and caused rising costs.

Morris Goldfarb, G-III’s chairman and CEO, discussing the impact of tariffs and sourcing shifts with analysts this week, said, “We’ve been seeking to diversify our sourcing network by arranging to move some production out of China and also succeeded in obtaining price concessions from our Chinese vendors. In addition, we’ve obtained price increases from some of our customers here in the U.S.”

Goldfarb said G-III knows it needs to further reduce its production in China “to a level where we can still maintain the consistent quality and craftsmanship developed with our vendors over the past 40 years.”

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At Gap Inc., president and CEO Art Peck told analysts on a conference call, “We’ve been migrating sourcing out of China for the last several years, and we’ll continue to do this responsibly going forward. As recently as three years ago, about 25 percent of our product was manufactured in China. In our most recent disclosure, that number was down to 21 percent. And if you include only apparel, our penetration is approximately 16 percent, which is significantly lower than the relevant portions of the industry.”

Diversification in apparel sourcing has taken hold, with many countries taking their share of U.S. imports, which increased 5.76 percent to a value of $26.45 billion for year to date through April compared to a year earlier, according to OTEXA.

In Asia, imports from Vietnam were up 12.88 percent in the period to $4.24 billion, while Bangladesh’s shipments reaching U.S. ports rose 13.91 percent to $2.03 billion. Coming in behind were imports from India, which increased 10.76 percent to $1.57 billion, and Indonesia, which rose 1.86 percent to $1.57 billion. Rounding out the top 10 suppliers to the U.S. for apparel were Cambodia, with U.S.-bound goods rising 2.45 percent to $810 million and Pakistan, which saw shipments increase 9.52 percent to $465 million.

Apparel imports from the Western Hemisphere were up 4.55 percent to $4.52 billion in the period, led by a 7.47 percent gain to $2.67 billion worth of goods from the duty-free Central American Free Trade Agreement countries. Honduras posted a 13.25 percent increase to $826 million in the period; El Salvador saw a 1.06 percent gain to $566 million; imports from Nicaragua were up 9.36 percent to $552 million, and Guatemala goods shipments to the U.S. rose 2.84 percent to $473.72 million.

While President Trump has lauded tariffs as a way to level the playing field to protect U.S. businesses against China’s trade policies involving intellectual property rights infractions and government subsidies, the desired result of easing the trade deficit hasn’t fully materialized.

The U.S. Census Bureau and the Bureau of Economic Analysis said Thursday that the goods and services deficit was $50.8 billion in April, down $1.1 billion from $51.9 billion in March. April exports were $206.8 billion, $4.6 billion less than March exports. April imports were $257.6 billion, or $5.7 billion less than March imports.

The April decrease in the goods and services deficit reflected a decrease in the goods deficit of $1 billion to $71.7 billion, and an increase in the services surplus of $100 million to $20.9 billion.

Year-to-date, the goods and services deficit has increased $4.1 billion, or 2 percent, from the same period in 2018. Exports increased $8.3 billion or 1 percent. Imports increased $12.4 billion or 1.2 percent.

The goods deficit with China increased $2.1 billion to $29.4 billion in April. Exports decreased $1.8 billion to $8.5 billion and imports increased $300 million to $37.9 billion.