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Tariff Effect Sends Tremors Through US Apparel Imports

Oh, how the mighty have fallen.

U.S. apparel imports from China in September—when 15 percent tariffs went into effect—nosedived 18 percent to $2.55 billion worth of goods compared with a year earlier. In volume, China shipped 13 percent fewer goods in the month to 1.17 billion square meter equivalents (SME) compared to September 2018, according to new data released Tuesday by the Commerce Department’s Office of Textiles & Apparel (OTEXA).

Nearly every major apparel company has reported slashing its sourcing from China to reduce risk as the raging trade war between the U.S. and China has triggered steep punitive tariffs and even one call by President Trump for all U.S. companies to cease doing business there.

“We received the majority of our Fall 2019 product prior to the Sept. 1 tariff increase, resulting in minimal financial impact to 2019,” Tim Boyle, president and CEO of Columbia Sportswear, speaking on a conference call last week, said. “Based on our projected 2020 production, base products sourced in China for the U.S. market is expected to represent a low-double-digit percent of the total estimated imported value.”

For the year to date through September, apparel imports from China were down 1.1 percent to a value of $20.1 billion, according to OTEXA, illustrating the steady erosion of sourcing from the top supplier for U.S. fashion companies.

The other major supplier that has fallen out of favor is Mexico, partially over geopolitical concerns such as the fate of its free trade status and rising costs in the country. U.S. apparel imports from Mexico were down 5.22 percent year to date through September to a value of $2.42 billion, OTEXA reported, and also dropped 18 percent for the month to $245.55 million from a year earlier.

Last week, Gildan Activewear said it was moving ahead with plans to close its textile and sewing operations in Mexico and relocate the equipment to its operations in Central America and the Caribbean Basin.

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Glenn Chamandy, president and CEO of Gildan, said Mexican production represented about 8 percent to 9 percent of capacity, which will now be moved to Central America and Honduras and “be absorbed pretty quickly.”

“We’ll have a better cost structure, as well,” Chamandy said. “We’re also aggressively moving ahead with our expansion in Bangladesh.”

In May, Gildan announced the completion of a $5 million land purchase in Bangladesh as part of a major Asian capacity expansion initiative to develop large-scale vertically integrated manufacturing in the region to support expected sales growth.

Bangladesh was one of five Asian countries that saw their apparel shipments to the U.S. rise in the period. No. 2 supplier Vietnam notched a 12.7 percent year-to-date gain to $10.36 billion, with its shipments up 16.8 percent from September 2018 to $1.29 billion.

Apparel imports from Bangladesh increased 9.96 percent year to date to $4.57 billion, but were down 3.5 percent to $484.92 million in the month compared to a year earlier. India’s shipments rose 8.37 percent so far this year to $3.24 billion, Cambodia’s were up 11.13 percent to $2.03 billion and imports from Pakistan advanced 9.41 percent to $1.1 billion.

Elsewhere within the Western Hemisphere, imports from Honduras increased 11.19 percent year to date through September to $1.09 billion and Nicaragua’s shipments were up 19.9 percent to $166.16 million.

Despite the trade turmoil that in part is meant to stir interests in U.S. manufacturing, the U.S. imported 4.76 percent more apparel year to date through September in 2019 to $65.08 billion worth of goods compared to last year. However, reflecting the move to get Chinese goods into the country ahead of the September tariffs, the U.S. imported 2.1 percent less apparel in the month for a value of $7.7 billion compared to September 2018.