US textile and apparel trade and sourcing snapshot
A snapshot of the current state of play in US textile and apparel trade shows imports last year fell for the first time in three years, producers continued to diversify their supply chains, and retailers raised their prices even though the unit value of imports declined.
While the results might not come as a major surprise in themselves, the findings of the annual 'Shifts in US Merchandise Trade 2012' report from the US International Trade Commission (USITC) confirm that macroeconomic shocks in key economies continue to impact global trade - and shed light on changes with key US partners.
First and foremost, US imports of textiles and apparel in 2012 slipped 0.1% or $103m to $113.5bn in 2012. The decline might have been modest, but it was the first drop since 2009.
China supplied 40% of US imports of textiles and apparel, making it by far the largest supplier. That said, imports from China were flat last year, rising just 0.3% to $44.9bn - in marked contrast with the substantial increases seen each year between 2009 and 2011.
This largely reflects efforts by producers to diversify their supply chains by moving some manufacturing capacity from China to other Asian producers, notably Vietnam, the ITC said.
Compared with the year before, the value of US apparel retail sales increased by nearly 6% in 2012, reflecting growth of $13.4bn in consumer expenditures on garments.
However, higher sales volumes do not explain this growth, since US imports of apparel by quantity, or square metre equivalents (SMEs), declined by 1% in 2012.
Instead, increased expenditures are attributed to retail inflation due to increased commodity input prices, rising wages in manufacturing countries (primarily China), and increasing freight costs.
US imports from Asia, the largest regional supplier - accounting for three-quarters of all textile and apparel imports - decreased by 0.2% to $84.7bn last year.
Imports from Pakistan accounted for much of the decline, falling by 10% to $3.1bn as production in the country experienced major setbacks as a result of natural gas and electricity shortages. Around 40% of textile factories either shut down or ran at reduced capacity, and thousands of workers were laid off, cutting production and exports from the country.
By contrast, US imports from Vietnam increased by 6%, making this the only gain among the ten largest suppliers. The US is Vietnam's largest export market for textiles and apparel.
US imports from Latin America, comprising CAFTA-DR countries and Mexico, accounted for 14% of total sector imports in 2012 and fell by 1%.
The decrease was primarily driven by a 2% drop in imports from Mexico, where competitive pressures intensified following the expiry of Mexican safeguards against imports of textiles and apparel from China in December 2011. Regional FTAs, including CAFTA-DR, also hampered the competitiveness of the Mexican industry.
Garments account for three-quarters of all US textile and apparel imports. This ratio remained stable last year after volatile cotton prices saw a shift in demand away from cotton clothing but resulted in a corresponding rise in relatively cheaper manmade fibre apparel.
By value, apparel registered the largest overall change for US imports - a decline of $706m to $85.0bn. This decline was driven by decreases in imports of shirts and blouses; women's and girls' suits, skirts, and coats; other wearing apparel; and men's and boys' coats and jackets.
Within these subcategories, US imports of shirts and blouses experienced the largest drop, falling by 3% to $26.0bn.
US export trends
US exports of textiles and apparel fell by $222m, or 1%, to $19.2bn in 2012.
Unlike US imports, exports are largely composed of textiles, at 82% of the total. This is because textiles are most often used as intermediate inputs for finished products manufactured abroad, which are then imported back into the US.
The top markets for US textile exports are partner countries in the North American Free Trade Agreement (NAFTA) or the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA) - which collectively accounted for 61% of exports in 2012.
In addition to preferential duty treatment, these partners benefit from shorter lead times because of their proximity to the US market.
Since many of the fibres, yarns, and fabric exported to NAFTA and DR-CAFTA partner countries re-enter the US as finished garments, demand for US textiles is closely correlated to imports of apparel from these countries.
As such, US textile exports to these trading partners declined by 4% between 2011 and 2012, which was partly reflected in a 1.2% decrease in US imports of apparel from these countries during the same period.
Shipments from the US to its three leading export markets - Mexico, Canada, and Honduras - showed mixed results between 2011 and 2012.
US exports to Mexico rose by 2% to $4.2bn, and exports to Canada rose 5% to $3.9bn. Meanwhile, US exports to Honduras dropped by 21% to $1.5bn.
Exports of fibres and yarns saw the greatest decline, of 10% to $5.1bn, while exports of fabric were largely unchanged. As these inputs are primarily used in the production of finished apparel, the decrease in US exports again reflects fewer shipments of inputs to apparel manufacturing facilities abroad.
US trade balance
Taken together, the figures mean that in 2012, the US trade deficit in textiles and apparel rose slightly - by 0.1% or $119m - to $94.3bn, after the 1% drop in exports was outweighed the 0.1% decline in imports.
Imports supply most US consumer demand for textiles and apparel, but while the average unit value of US imports decreased slightly, higher retail prices meant consumer spending on clothing was up 5%.
Three categories - shirts and blouses; trousers; and robes, nightwear, and underwear - together accounted for the largest share (43%) of US textile and apparel imports last year, although they slipped 1% to $49.0bn.
Though US exports of fabric continued to lead sector exports, their 1% rise to $6.3bn was outweighed by falling US exports of other major textile products, namely fibres and yarns.
The US continued to register a trade deficit with most of its major trading partners in this sector in 2012. Notably, the trade deficit with Honduras increased by 40% to $1.2bn.
The only major exception was Canada, the second-largest export market for US-made textile and apparel items. Here the US registered a trade surplus of nearly $1.5bn.
Click here for a separate snapshot of US footwear trade and sourcing.
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