Blog: Leonie BarrieUS border tax a contentious issue

Leonie Barrie | 20 February 2017

Fresh from their disappointment at seeing the Trans-Pacific Partnership (TPP) free trade deal abandoned last month with an executive order by President Donald Trump, the US apparel and footwear sector is bracing itself for even greater cost increases to come.

The focus of its sharpened concern is a so-called Border Adjustment Tax (BAT) contained in a Republican package of tax legislation currently under consideration by the US House of Representatives.

The tax is such a contentious issue that the chief executives of eight of America's largest retailers – including Gap Inc and Target Corp – met with the President last week to discuss their concerns.

During the week Trump also said he is looking at "tweaking" parts of the North American Free Trade Agreement (NAFTA) pact with Canada, and that the focus of any changes would be on US trade with Mexico.

In fact, so many new twists and turns are taking place on the trade front that we’ve launched a column to try to unravel the latest developments and their likely impact on the global apparel supply chain – along with advice on how buyers and suppliers should respond.

When it comes to the UK’s decision to leave the EU, Brexit appears to mean 'hard' Brexit. But what does it mean for the UK's fashion and textile industry, which accounts for tens of billions of pounds in GDP and hundreds of thousands of direct jobs?

In terms of supplier countries, falling prices and an industry focus on specialisation and value added have all helped Vietnam increase its share of US apparel imports over the last year – rising to 12.45% of the total in 2016.

But the US Government has again assessed the Bangladeshi capital Dhaka as a "high threat" location for terrorist activity, heightening safety fears for foreign garment buyers visiting the country.

The US economy got off to a strong start to the year, with almost every major US retail sector reporting higher sales in January, according to the latest government figures.

But apparel giant VF Corporation, owner of the North Face and Timberland brands, said it expects revenue to decline in the first half of 2017 after revealing a fall in both sales and earnings for the fourth quarter and fiscal 2016.

The most recent quarterly filings from US apparel and footwear brands and retailers have also seen Kate Spade say it is exploring a possible sale, a slump in earnings at Skechers, and record sales and earnings at Columbia Sportswear.

A number of US outdoor brands including Polartec and Patagonia have withdrawn from the Outdoor Retailer show in Utah in protest at the state government's public land policy, which they say doesn't support conservation and ignores the industry's contribution to the economy.

And the Better Cotton Initiative(BCI) says demand for more sustainable cotton is on the rise, with Swedish retailer H&M and sportswear giants Adidas and Nike leading the field in its 'Better Cotton league'.

Meanwhile, in other news, Li & Fung is to be dropped from Hong Kong's Hang Seng Index amid falling earnings and sales; RalphLaurenhas tapped former Tom Ford COO Tom Mendenhall as brands president; and Brazil's largest apparel department store chain, Lojas Riachuelo, has cut its China sourcing from 40% to 25%.

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