At the halfway point of 2019, the fallout of the China-US trade spat on US apparel imports is starting to surface. Growth in shipment volumes from Vietnam and Bangladesh outpaced that of China in the first six months of the year – but imports from China are still edging up and the country’s share of the market is virtually unchanged.
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 was flat month-on-month in June to 2.28bn square metre equivalents (SME).
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The figures also show a 3.17% rise in volume against the same month last year and 5.8% growth in value terms year-on-year to $6.9bn.
In terms of individual supplier countries, eight of the top-ten recorded a year-on-year increase in June, but three of those only experienced marginal growth. The largest rise came from Cambodia at 18.69% on last year to 72m SME. Bangladesh was the second-highest mover with a 6.4% increase year-on-year to 176m SME.
China, the largest supplier of apparel to the US, saw shipments increase 3.58% to 963m SME. Imports from the country were up 12% on a month-on-month basis from the 855m SME recorded in May.
Vietnam, the second-largest apparel supplier to the US, saw flat growth of 0.97% year-on-year to 303m SME. Pakistan enjoyed a 3.4% rise in shipments to 45m SME, although it is the smallest of the 10 major apparel suppliers to the US. El Salvador also saw growth in June, rising 1.64% over last year at 68m SME.
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By GlobalDataOf the remaining countries, India saw flat growth of 0.86% at 86m SME and Indonesia’s shipments grew 0.47% to 92m SME. Mexico’s imports fell 8.27% to 71m SME and Honduras also saw a decline in shipments at 0.08% to 89m SME.
Textile and apparel imports meanwhile only nudged up 0.51% to 5.72bn SME year-on-year, but rose 2% in value terms to $9.17bn. US imports of textiles alone, meanwhile, fell 1.18% to 3.4bn SME in June, and dropped 8.1% in value terms to 2.2bn SME.
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 4.6% to $53.5bn in the January to June period, from $51.17bn in the same period a year ago. Within this, apparel imports grew 5.91% to $40bn, while textiles edged up 0.95% to $13.48bn.
In volume terms, eight of the ten apparel supplier countries booked growth during the first six months of the year, with Vietnam seeing the highest growth of 8.73% to 1.98bn SME, closely followed by Bangladesh at 8.37% to 1bn SME. India was just behind on shipment growth of 8.1% to 637m SME.
China saw volumes increase 3.06% to 4.9bn SME, although the value of China’s shipments was flat at 0.68% to $11.3bn.
In contrast, Cambodia booked a 0.92% decline in shipments to 464m SME, while those from Mexico were down 4.4% to 423m SME.
Facts behind the figures
Halfway through 2019, and there are few signs of a sourcing shift away from China as trade tensions with the US intensify. Anecdotal evidence may suggest that many brands are moving their purchases out of the country, yet China remains by far the biggest supplier of apparel to the US with a 37% share of the market in the first six months of the year – a stake that is almost unchanged from a year ago.
Neighbouring alternatives Vietnam and Bangladesh are making some inroads, but their shares of the US market have seen marginal gains in the first-half of 2019. Vietnam’s share has risen from 14.2% to 14.8% year-on-year; while Bangladesh’s is up from 7.8% to 8.1%.
Indeed, the data shows the volume of US apparel imports from China alone is greater than the sum of its next five largest suppliers – highlighting the challenge for sourcing teams looking for other suppliers as alternatives to China. No other country can match China in terms of the size of its supply base, its range of skills, its quality levels, its product variety and the completeness of its supply chain. The country also continues to lead the way when it comes to efficiency and infrastructure.
But the move to seek alternative may accelerate after US President Trump last week announced plans for a 10% increase in tariffs on an additional $300m worth of products, effective 1 September. The move has left US apparel brands, retailers and importers reeling, with many concerned the tariffs will hike sourcing costs, increase competition for factory space outside of China, drive up the price of machinery and materials used by domestic US manufacturers, and wreak havoc through a lack of alternative sources of supply, not only for factory space but also inputs used throughout the footwear and clothing supply chain.
Tim Boyle, president and CEO of Columbia Sportswear Company, says higher tariffs “will be a disaster for the American economy, employers and consumers,” and that the company, whose brands include Columbia, Mountain Hardwear, Sorel and prAna, “will be forced to raise prices on our products – along with many other manufacturers in our industry.”
Footwear firm Crocs announced earlier this year it was cutting the amount of US product it sources from China by more than two-thirds over the next year, and G-III Apparel Group outlined several steps it was taking to offset the impact of the trade spat, which include cutting production in China and raising prices.
These moves echo a recent survey of US fashion sourcing executives by the United States Fashion Industry Association (USFIA), which found 83% of respondents expect to decrease sourcing from China over the next two years.
Up to 63% also blame uncertainties around the US tariff action for higher sourcing costs, with the average price of US apparel imports from Bangladesh, Vietnam and India – the main alternatives to China – rising by more than 20% in the first five months of 2019 as more companies move their orders to these countries.
That said, ‘China plus Vietnam plus Many’ is still the most popular sourcing model among respondents – although China is no longer always the top supplier for US fashion companies. Around 25% of respondents indicated they intend to source more from Vietnam than from China in 2019.
And many US brands and retailers have been working closely with their Chinese vendors to negotiate lower prices – or “pre-negotiated burden sharing agreements” – to keep their orders in China.
Vietnam is seen as a firm favourite as an alternative sourcing destination, with Wood Mackenzie’s senior research analyst Tracey Zhou suggesting a number of apparel factories in Vietnam received orders early this year for six months capacity or even for a whole year’s capacity. And John McClure, head of sourcing for SE Asia at Marks & Spencer, recently saying Vietnam “has the biggest amount of investment of any Southeast Asia country at the moment.”
However, there are also concerns about Vietnam’s limited production capacity and the increasing cost of sourcing from the country. In 2018 apparel per unit cost was $3.28 from Vietnam compared with China’s $2.35.
And despite its price advantages, Bangladesh is still seen as less attractive than many of its competitors with regards to speed-to-market, flexibility and agility, and risk of compliance.
