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Lost In the Shuffle, Chinese Fabric Mills Suffer Trade War Fallout

While much has been made about the erosion of U.S. imports of apparel from China in the last year as a result of the U.S.-China trade war and lead up to this month’s imposition of tariffs, what has been somewhat lost is the decline of U.S. textile imports from China.

The numbers pale in comparison to China’s girth as a supplier of U.S. apparel, since U.S. clothing production has gone through a major decline in the last 20 years, even with some bounce back in recent years, but they still show a substantial impact.

In the first seven months of 2019, U.S. fabric imports from China fell 22.36 percent in value to $885.62 million compared to the same period last year. For the 12 months through July, China’s market share of fabric imports was down to 27.34 percent, as shipments were 7.52 percent below the previous year. This also indicates that the rate of fabric import decline picked up precipitously as the threat of tariffs became more real.

Edwin Keh, CEO of the Hong Kong Research Institute of Textiles and Apparel and a speaker at the upcoming Sourcing Summit New York, said China mills certainly seem to have fallen on tough times.

“Domestic demand is weak, overseas demand is declining and [there are] general concerns about business volumes,” Keh said.

Chinese yarn imports, a lesser market since U.S. yarn manufacturing is more viable than fabric production, dropped 33 percent year to date through July to $103.2 million. Similarly, yarn imports for the 12 month-period from China were down 6.13 percent, leaving China with a 16.79 percent market share.

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Most factories, Keh said, are absorbing some of the additional U.S. import duties to keep production lines moving.

“This is a short term fix, probably not sustainable for the next quarter,” he said. “There’s so very little room for price reductions left. I expect China will also be rapidly moving their production capacity investments offshore.”

Munir Mashooqullah, founder of Synergies Worldwide and now an adviser and board member for textile companies in Pakistan, Bangladesh, China and Europe, said most Chinese fabric mills are holding prices and, in some cases, making the sale to keep capacities running.

“The tariff, while anticipated, did come in last minute and the extra 5 percent announced by Trump on the eve of the deadline was a blow,” Mashooqullah said.

If the current tariffs stay in place, or if threatened future increases take hold, Chinese mills might not be able to absorb the added costs.

In fabrics, China’s loss was India’s, South Korea’s, Vietnam’s and Germany’s gain, with each of the Top 10 supplier countries posting double-digit increases in the period. In yarns, Mexico, South Korea, Taiwan and Italy have registered major gains this year.

Industry observers and market sources said many Chinese mills have shifted their focus to supplying their Asian neighbors with textile to make apparel. As part of the Belt and Road Initiative, Chinese companies have also been investing in African apparel and textile factories.

“There are lots of shifts to Southeast Asia due not only to the trade war, but general price increases in China,” Keh said. “Some domestic Chinese brands are also moving production offshore.”

Adding to that, Mashooqullah said, “Chinese fabric is heading to Africa, Bangladesh, Vietnam and Cambodia,” as well as other smaller clothing makers.