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60% Hit: Covid Crimped May Apparel Imports, OTEXA Says

The economic effects on U.S. apparel imports from the coronavirus pandemic didn’t ease up in May, as retailers that did open up clearly had plenty of merchandise to work off before bringing in fresh goods.

Overall apparel shipments to the U.S. were down 60 percent in the month compared to a year earlier to a value of $2.68 billion, the Commerce Department’s Office of Textiles & Apparel (OTEXA) reported Thursday. For the comparative year to date through May, U.S. apparel imports fell 27.76 percent to $23.92 billion, according to OTEXA.

Every major supplier saw steep declines in the year-to-year comparisons for the first five months of the year, and only Cambodia posted an uptick in year-to-date shipments.

Leading the drop-off in the five-month tally was now-No. 2 supplier China, with a 49.23 percent decline in the period to $4.61 billion. For the month compared to a year ago, China’s shipments fell 60 percent to $723.68 million. On top of sluggish demand from the pandemic, China’s apparel industry carries the added burden of companies having shifted their sourcing out of the country during the protracted, tariff-fueled U.S.-China trade war.

Apparel imports from top supplier Vietnam were down 9.36 percent in the year through May to $4.81 billion, while its year-to-year shipments fell 41 percent to $624.51 million. No. 3 supplier Bangladesh didn’t fare any better, with year-to-date imports down 12.1 percent to $2.24 billion and its year-to-year shipments off 68 percent to $168.45 million.

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Of the rest of the Top 10 apparel suppliers to the U.S., only Cambodia had an increase in the five-month period, gaining 6.46 percent to $1.08 billion. For the month compared to May 2019, imports from Cambodia fell 35 percent to $130.63 million.

Among the other major Asian suppliers, imports from Indonesia declined 15.29 percent to $1.62 billion in the five months and were down 46 percent to $187.03 million in May from a year earlier; India’s shipments declined 27.08 percent to $1.43 billion year to date and were off 84 percent to $62.98 million year over year, while imports from Pakistan decreased 15.71 percent in the five months and fell 68 percent to $38.49 million for the month compared to a year earlier.

The three Western Hemisphere countries in the Top 10 suppliers all saw major declines in the five-month period and the year-to-year comparisons. Imports from Mexico declined 37.46 percent in the year through May to $827 million, while falling 66 percent to $94.39 million in the month from a year earlier; shipments from Honduras dropped 42.57 percent year to date to $610 million and were off 89 percent year-to-year to $25.82 million, and imports from El Salvador declined 15.71 percent in the five months through May to $439 million and plummeted 92 percent in year-to-year comparisons to $12.09 million.

Some sourcing executives feel the United States-Canada-Mexico Agreement (USMCA) that went into effect on Wednesday could give a boost to trade in the region, while others are more skeptical.

“The new U.S.-Mexico-Canada Agreement strengthens two of our most important trading relationships and creates certainty for retailers to invest, plan for the future, create jobs, and provide consumers with the widest possible selection of affordable and quality products,” Retail Industry Leaders Association president Brian Dodge said. “Never has that been more important than during the economic crisis brought on by the COVID-19 outbreak.”

Resiience360 analyst Tim Yu noted that USMCA introduces a number of new rules and changes that effect North American supply chains. This includes the Facility-Specific Rapid Response Labor Mechanism to monitor labor rights issues in Mexico, which Yu said “will likely create greater burdens on Mexico.”

“Whether the USMCA will be successful in restructuring global supply chains and bringing manufacturing back to North America remains to be seen,” he said. “Over the long term, companies may decide to increase or shift production to their existing plants in North America to comply with higher regional content requirements. However, such restrictions could also have the unintended consequence of reducing North American production.”

Also on Thursday, the U.S. Census Bureau and Bureau of Economic Analysis (BEA) announced that the goods and services trade deficit was $54.6 billion in May, up $4.8 billion from $49.8 billion in April.

The May increase in the goods and services deficit reflected an increase in the goods deficit of $4.2 billion to $76.1 billion and a decrease in the services surplus of $600 million to $21.5 billion.

The deficit with China increased $1.9 billion to $27.9 billion in May. Exports increased $700 million to $10 billion and imports rose $2.7 billion to $37.9 billion.

The deficit with the European Union decreased $1.6 billion to $12.7 billion in May. Exports declined $1 billion to $14.9 billion and imports decreased $2.6 billion to $27.6 billion.

“The declines in exports and imports that continued in May were, in part, due to the impact of COVID-19, as many businesses were operating at limited capacity or ceased operations completely, and the movement of travelers across borders was restricted,” BEA said.

May exports were $144.5 billion, $6.6 billion less than April, and May imports were $199.1 billion, $1.8 billion less than the prior month.