Skip to main content

With TPP Out, What’s Next for US Trade Deals?

It’s hard to tell what exactly will happen with trade under the Trump administration, but if the new U.S. president made one thing clear when he pulled the States from the Trans Pacific Partnership Monday, it was that all trade relations could be up for renegotiation.

In a presentation titled, “Trade in the Time of Trump,” at Texworld USA in New York Monday, Gail Strickler, president of global trade for Brookfield Associates and former Assistant U.S. Trade Representative for Textiles at USTR, perhaps did a little to calm an audience of uncertain minds.

“Our existing FTAs and preference programs that are already enforced—regardless of the rhetoric—I personally don’t think those are likely to change,” Strickler said after touching on the now defunct TPP.

On Monday, in addition to pulling out of TPP, President Trump was also expected to sign an executive order indicating his intent to renegotiate NAFTA, but the White House has not confirmed that order was signed.

With TPP out, NAFTA on a tightrope and border taxes on imports being bandied about, apparel sector stakeholders are reevaluating their sourcing strategies to brace for possible changes in trade.

They’re also wondering what’s going to happen with U.S.-China relations.

“The anti-China, anti-trade sentiment being espoused by the new administration creates tremendous uncertainty for our industry,” Strickler said. “And the threat of a border tax further exacerbates the concern that the apparel industry, which imports more than 95 percent of its product could suffer a disproportionate share of the burden.”

Related Stories

Though many things remain uncertain, for Strickler, NAFTA going way entirely isn’t one of them.

Roughly 60 percent of the textiles and apparel imported into the U.S. under NAFTA are made up of U.S. yarns and fabrics. Letting go of that would have a detrimental impact on what’s left of the domestic textile sector and 120,000 textile jobs would be at risk.

In a December statement, the National Council of Textile Organizations (NCTO) said: “The American textile supply chain exports more than $10 billion in yarns and fabrics to Mexico and other Latin American countries. When consumers buy clothing items from there, they are more likely to be supporting American manufacturing jobs,” according to the council’s president and CEO Auggie Tantillo. “On the other hand, if a garment is labeled ‘Made in China,’ it is almost certain that none of the yarns and fabrics used to make it come from the United States.”

So the new administration has much to consider before making drastic moves on trade. And there’s a lot of money at stake.

Forty percent of the tariffs U.S. Customs and Border Protection collects come from textiles and apparel, and those importing textiles and apparel to the U.S. are currently paying more than $11 billion in duties and tariffs.

“A border tax the way it is being proposed would be a tremendous hardship for this industry,” Strickler said. “I think you really have to be strategic. You have to think about what is in the U.S. interest and what is in the political U.S. interest, and the two might be completely different.”

For now, American brands and retailers may want to turn their attention to trade preference programs, where things are still looking at least somewhat concrete.

At present, preference programs like the African Growth and Opportunity Act (AGOA), Qualifying Industrial Zones (QIZ) and Haiti HELP & HOPE, only account for 3 percent of imports, compared to 17 percent of imports that are brought in under free trade agreements, according to Strickler.

AGOA was recently renewed for 10 years and should remain intact with the duty free trade benefits it provides for eligible countries through 2025. The Haiti HELP and HOPE II, which lets apparel wholly assembled in Haiti enter the U.S. duty free, should also be firmly in its place until 2025. The QIZ program, which allows Egypt to export product to the U.S. duty free, provided 10.5% of the value of the goods incorporate inputs from Israel, never expires.

Each of these regions hold their own opportunities for the apparel sector, and brands reevaluating their strategic sourcing amid all of this uncertainty could benefit from giving each deal a closer look.

Ending the talk on as positive a note as possible, Strickler reminded the audience that the president doesn’t make trade plans singlehandedly.

“Regardless of who the president is, trade is still overseen by the appropriate committees in Congress,” Strickler said, adding that many of the people who participated in negotiating TPP still hold the same posts. “Hopefully what you will see if NAFTA is renegotiated, is some of the changes that were going to come under TPP, like a more modern way of looking at rules of origin.”