U.S. apparel imports were dramatically impacted by the global coronavirus pandemic and some other geopolitical factors, falling 23.46 percent in 2020 to a value of $64.07 billion from $83.71 billion in 2019, the Commerce Department’s Office of Textiles & Apparel (OTEXA) reported Friday.
The China conundrum
The most significant effect on major suppliers was seen by China. The still No. 1 apparel supplier saw its shipments to the U.S. drop 39.16 percent to $15.16 billion.
China’s market share declined to 23.65 percent from 29.68 percent a year earlier and 33 percent in 2018.
In 2020, China was caught in an ongoing trade war with the U.S. and tariffs imposed by the Trump administration, on top of factory closures at the onset of the Covid crisis and an overall sourcing flight to avoid risks and costs, trade experts said.
While the decline in imports from China has decelerated in the last few months, “I still think the trend is definitely down for China beyond issues related to Covid,” said Nate Herman, senior vice president for policy at the American Apparel & Footwear Association.
“However, China will still be one of the Top 2 suppliers for years going forward,” Herman added. “It’s a matter of the rest of the world trying to build the capacity to handle what China was handling.”
Even if China isn’t “making the final pair of pants or shirt, factories there are still making all the inputs like fabrics” that go into apparel and are selling them in Asia and around the world, he added.
For his part, Dr. Sheng Lu, associate professor at the University of Delaware’s Department of Fashion & Apparel Studies, said, “U.S. fashion companies are not giving up on China as one of their essential apparel-sourcing bases, although companies continue to reduce their China exposure overall.”
“For a lot of companies, the trade war and Covid accelerated the trend…which was to try to shift out of China, so they were not as dependent on a single source,” Julia Hughes, president of the United States Fashion Industry Association, said. “The initial Covid disruptions really brought that home for folks as they looked at their sourcing strategies.”
Hughes noted that the forced labor allegations and findings in China’s Xinjiang Uyghur Autonomous Region have also made companies shy away from China to avoid getting caught up in having goods seized or implicated.
Cambodia, Pakistan and Vietnam showed surprising strength during the past year and are likely to continue, along with Bangladesh, India and Indonesia, Hughes said.
“There’s a lot of risk around the world and there aren’t a lot of safe harbors,” Hughes said, citing for example the military junta in Myanmar just as that country was building an apparel manufacturing base. “Then there’s the talk of Vietnam reaching capacity and the government there not wanting the industry to grow that much more over concern like water usage and labor strife.”
Hughes said Cambodia, Pakistan and Vietnam showed surprising strength during the past year and are likely to continue, along with Bangladesh, India and Indonesia.
“I have to expect that we’re going to see some expanded trade with Indonesia and India,” she added. “Both of those countries have deep vertically integrated industries and have a real opportunity to take advantage of the desire of companies to look for other destinations for their manufacturing.”
Herman felt that among the other top tier countries, Vietnam “dodged the bullet” of threatened tariffs by the Trump administration and “will continue to be a winner,” as will Cambodia, which was one of the few countries that saw apparel imports increases during the pandemic, thanks to capacity availability after the European Union took away its preferential trade status and the Vietnam tariff threat, although Cambodia does have some human rights issues it needs to address.
“The advantage with India, in particular, is that it has a lot of material availability,” Herman said. “India makes is own denim…so that takes away some of the problems of relying on China. The same with Bangladesh with knit product, and Indonesia has the capacity and knowledge to make technical products.”
Looking at how those Top 10 Asian countries fared in 2020, No. 2 supplier Vietnam saw its shipments fall 7.25 percent for the year to $12.57 billion, according to OTEXA, with its market share rising to 19.62 from 16.18 percent in 2019. Imports from No. 3 Bangladesh declined 11.73 percent to $5.23 billion last year, according to OTEXA.
Cambodia was the only Top 10 supplier to see and increase in its shipments to the U.S. in 2020–up 5.45 percent to $2.82 billion. Imports from Indonesia fell 20.09 percent to $3.52 billion for the year, while India’s shipments declined 25.58 percent to $3.02 billion and Pakistan’s dipped 4.17 percent to $1.4 billion.
Rounding out the Top 10 suppliers were three Western Hemisphere countries–Honduras, Mexico and El Salvador–saw import declines in 2020 of 34.6 percent to $1.83 billion, 29.49 percent to $2.2 billion and 29.55 percent to $1.4 billion, respectively.
While they all enjoy duty-free status, Lu said there is “no clear evidence that suggests near-sourcing from the Western Hemisphere is happening in a large scale.”
In the Western Hemisphere, Herman said Haiti “has the potential” for growth if its political situation can stabilize, with the country’s trade preference benefits in place for a couple of more years. In addition, Nicaragua and the Dominican Republic–both part of the Central American Free Trade Agreement–“are the two I would bet on,” he said.
“Nicaragua seems to have found its groove and the DR seems to have come back a bit,” Herman said.
He does see Mexico stabilizing now that the U.S.-Mexico-Canada Agreement is in place, and it could grow beyond its strength in denim.
Hughes said the Central American countries and factories that are part of the Central American Free Trade Agreement should be doing more to promote themselves, and the lack of trade shows hasn’t helped that effort. But she does feel countries such as Nicaragua and the Dominican Republic are poised to grow their apparel imports to the U.S.
Herman also feels Africa’s nascent industry and future are “still bright,” and “one of the initiatives we’ll be starting early on is trying to get early renewal of AGOA and that will help give Africa traction.”
Among the African Growth & Opportunity Act countries showing some strength were Lesotho, Ethiopia and Tanzania, while non-AGOA Egypt is a key supplier on the continent.
Shipments from the Sub-Saharan countries that are part of AGOA declined 15.23 percent for the year to $1.22 billion. Imports from Egypt were down 20.27 percent to $781 million in 2020.
The bottom line for importers, Herman said, is that they’ll be able to make decisions based on greater certainty.
“We believe the Biden administration will take a much more steady, predictable approach to trade,” he said. “While there might still be tariffs, we’ll know way ahead of time. That part of the uncertainty that has dogged the industry over the last four years will not be there.”