US imports from Southeast Asia rose during August

US imports from Southeast Asia rose during August

In a reversal of trends seen in July, the three Central American countries that are the largest suppliers of clothing to the US – Mexico, El Salvador and Honduras – saw a dramatic fall in shipments in August. And imports from Southeast Asia crept back up with Cambodia booking the largest growth, suggesting US buyers are tapping into neighbouring countries as the US-China trade war intensifies.

The latest figures from the Department of Commerce's Office of Textiles and Apparel (OTEXA) show the volume of US apparel imports from all sources fell 1.4% month-on-month to 2.78bn square metre equivalents in August. The figures also show a 2.1% rise in volume against the same month last year and a 1.6% increase in value terms year-on-year to US$8.4bn.

In terms of individual supplier countries, only half of the top-ten recorded a year-on-year increase in August, with Cambodia booking the largest growth of 28.47% to 115m SME.

But China – which is the largest supplier of apparel to the US – saw shipments rise 5% year-on-year to 1.35bn SME, with imports from the country up 3% month-on-month from the 1.31bn SME recorded in July.

Vietnam, which is the second-largest apparel supplier to the US, recorded year-on-year volume growth of 1.57% to 335m SME, still vastly behind China. And Bangladesh, which ranks number three on the supplier league table, saw shipment growth of 4.5% to 164m SME.

India was the fifth country to see volume growth of 1.26% 85m SME.

But neighbouring Pakistan booked a decline in shipments of 4.6% to 50m SME, as did the three South American countries that are the largest suppliers of clothing to the US. El Salvador booked the largest decline of the 10 in August, at 11.55% down to 60m SME. Indonesia also saw volumes significantly drop during the month at 11.45% to 92m SME.

Combined textile and apparel imports, meanwhile, grew 4% year-on-year to 6.63bn SME in August, but in value terms were flat at 0.7% to $10.9bn. Textiles alone recorded growth of 5.4% to 3.85bn SME, but in value terms was down 2.3% to $2.47bn. 

Apparel volumes - 12-month overview

AugustSeptemberOctober NovemberDecemberJanuaryFebruaryMarchAprilMayJuneJulyAugust
China129113511330852874110690747765985596313091351
Vietnam331317387257267402334289322337303383335
Bangladesh158171157129150200177195158177176153164
Indonesia10492116798211210711610293927892
Honduras87907886836076878492899684
India8481937273107103115114112869285
Cambodia9010191647395768269706189115
Mexico75657265576268787374776868
El Salvador69656360665059686269667960
Nicaraguanullnullnullnull45nullnullnullnullnullnullnullnull
Pakistan52435247null5241444655445250

Source: The Department of Commerce's Office of Textiles and Apparel (OTEXA)

Year-to-date and eight-year overview

While monthly trade data is often volatile, with big swings from one month to the next, a broader view of the year so far shows the value of total US apparel and textile imports was up 4.38% to $75.8bn in the year-to-date, from $72.6bn in the same period a year ago. 

Drilling down, apparel imports grew 5.76% to $57.3bn, while textiles were up 0.31% to $18.5bn.

Eight of the top ten apparel supplier countries booked shipment growth during the first eight months of the year, with Vietnam seeing the largest increase at 8.2% to 2.7bn SME.

Apparel volumes (SME) – 8-year overview

20112012201320142015201620172018% change y-o-y
China9738.179881.910369.8710780.0611385.741117511365116702.6
Vietnam1998.3792145.0412430.3552751.0833135.5553352360237273.4
Bangladesh1539.5271521.9161692.4471609.7051869.9431862185419354.3
Indonesia1307.3971262.6631261.8021246.3911264.028126812291174-4.4
Honduras1182.7911118.7051073.3221084.7821114.3710811065991-6.9
India899.513834.972885.229956.6971023.5451044103210865.2
Cambodia1037.3661039.1621065.0491020.7081051.48490393110088.2
Mexico946.174897.016908.5916.85898.3998808398501.3
El Salvador782.192789.751796.812788.692813.004825780763-2.1
Pakistan625.846581.654584.016586.273590.9695355335584.6
Nicaraguanullnullnullnullnull5315315605.4

Source: The Department of Commerce's Office of Textiles and Apparel (OTEXA)

Facts behind the figures

During August, US president Donald Trump confirmed an additional tariff hike on Chinese imports – including all clothing and footwear – pushing up duties to 15% instead of the 10% the industry had been expecting from 1 September and 15 December.

With China being the largest supplier of clothing to the US, the move naturally sent waves of panic through the industry. 

The chief of US apparel trade industry body the American Apparel & Footwear Association (AAFA), Rick Helfenbein, warned it would be "a disaster for American consumers, American businesses, and the American economy." While footwear industry heavyweights including Adidas, Nike, Clarks and Puma penned a letter to Trump urging him to cancel the hikes, warning the move would only serve to hurt workers and customers. 

Many brands that source China announced they were taking steps to reduce their reliance on the supply powerhouse, including American Eagle Outfitters, Guess Inc, GIII Apparel Group and Tommy Hilfiger and Calvin Klein-owner PVH Corp. Earlier this year, a survey from the US Fashion Industry Association (USFIA) found 83% of respondents expect to decrease sourcing from China over the next two years. 

The figures suggest neighbouring Southeast Asian countries, particularly Cambodia and Vietnam, are top choices for replacing lost production in China, at least in the immediate term. 

Several experts have pointed Vietnam as one to watch including the Far East Asia head of sourcing for Marks and Spencer, John McClure, who says: "The demographics are great and it is soon going to be free trade with the US. It's in the North, close to China, so there's longevity of costs."

The sourcing shift is not just based on the fallout of the trade spat, but more generally because China is losing its competitive edge as a supplier due to a growing middle class, rising income levels and a move from production to consumption.

"There are 200m people in China that are now middle class," McClure adds. "The big cities are so consumer-driven it is unbelievable. The disposable income is driving massive consumption. China is going to be a very different place in the next ten years. It is certainly not going to be a source of cheap clothing or labour"

But others have warned sourcing from Vietnam is very different to working with Chinese suppliers, particularly in cultural terms. 

Vietnamese suppliers are more likely to favour quality over quantity, meaning it can take longer to deliver on orders. They are also less likely to attend to a buyer unless they have been introduced by someone they know or trust.

As for negotiations, Chinese suppliers may well try to catch business by promising great products, great prices "and later on the prices will increase and the quality will not be as good as promised," says Frank Vossen, who runs Seditex, a Ho Chi Minh City-based based sourcing consultancy, focused on quality control. The Vietnamese, on the other hand, do not run after business; business has to come to them. "They will be very conservative in their quotations, taking extra margins for errors, and once the relationship is established, the prices will be adjusted downwards."

Cambodia is one of Asia's poorest countries and its economy depends heavily on the garment industry, which accounts for more than 78% of the country's total merchandise exports. It is also the main non-agrarian employer in the country with nearly 900,000 workers employed in over 1,000 factories – which are almost exclusively Chinese-owned. While the majority of Cambodia's garment exports are to the US and the EU, the country is under close scrutiny from both over its human rights and political record.

The European Union is currently reviewing Cambodia's access to its Everything but Arms (EBA) preferential trade benefits, and members in the US Congress have introduced the Cambodian Trade Act of 2019, which could lead to a to review Cambodia's Generalized System of Preferences (GSP) benefits.

In May, global brands including Nike, Gap Inc, Levi Strauss and Under Armour wrote a to prime minister Hun Sen urging the Cambodian government to address criticism of its human rights record. The brands together imported goods from the Southeast Asian nation to the tune of US$9.5bn last year.

But the country looks to be taking steps to improve the way it is perceived globally. At the end of last month, the government announced a 4.4% rise in minimum wages for garment and footwear workers to $190, effective January 2020.

And a report from the International Labour Organization revealed there could be an opportunity for fresh investment and production in Cambodia's footwear sector. Between 2013 and 2018 the footwear sector's share of Cambodia's total garment, textile and footwear export value grew by 4.4 percentage points, while the garment sector's share fell by almost 10 percentage points.