The Impact of U.S. Trade Policy on Global Sourcing & Business Samantha Sault Vice President, Communications United States Fashion Industry Association (USFIA) October 2018
fashion made possible by global trade
By October 2018, President Trump has… • Withdrawn from the Trans-Pacific Partnership (TPP) • Renegotiated U.S.-Korea Free Trade Agreement • Renegotiated NAFTA (now called USMCA) • Imposed new penalty tariffs on imports from China – Protect U.S. national security (steel/aluminum) – Punish China for forced technology transfers, unfair licensing requirements, and IPR violations
US Section 301 tariff measures on Chinese products Affected products Effective date Tariff rate Process List 1 Products that generally fall into July 6, 2018 25% on $34 billion Exclusion instructions the technology sector and cut annual trade value published in July. across the aerospace, information Deadline in October. and communications technology, robotics, industrial machinery, and automotive industries (818 Tariff lines) List 2 Products principally identified August 23, 2018 25% on $16 billion Public hearing in July. under China’s “Made in China annual trade value Exclusion process. 2025” policy (279 Tariff lines) List 3 Many products including consumer September 24, 2018 10% immediately and Public hearing August items such as headwear, leather 25% on 1/1/2019 on 20-27. Exclusion apparel, handbags, luggage, $200 billion annual process TBD. gloves, and furniture. (6031 Tariff trade value lines) PwC "Next Steps on China Tariffs"
What’s on the horizon? • More trade restrictions and penalty tariffs – autos at big risk • Threatening additional 10-25 % tariffs on all imports from China • World Trade Organization? • Discussing possibility of bilateral trade agreements with UK, Switzerland, Japan, Philippines, Africa • Focus on FDI – “open for business”
What do fashion brands and retailers think? USFIA’s 2018 Fashion Industry Benchmarking Study says…
Executives’ Top Business Concerns, Ranked 1. Protectionist trade policy agenda in the United States 2. Market competition in the United States from e- commerce 3. Increasing production or sourcing cost 4. Market competition in the United States from brick- and-mortar stores or conventional peer competitors 5. Investing in and updating technology 6. Managing supply chain risks 7. Finding a new sourcing base other than China
Trade protectionism is the #1 concern. • Ranked #1 for the second year in a row • Ranked #8 to #11 in the first three years of the study between 2014-2016 • More than 60 percent of executives rank among their top five business challenges • More than 1/3 of executives rank #1 or #2
“We will never be completely out of China due to their speed, ease of doing business. The only thing that could change that is a protectionist agenda.” -American fashion brand in 2017
Cost pressure is returning this year.
The bottom line: SOURCING COST and FINDING A SOURCING BASE OTHER THAN CHINA are much more important to brands and retailers in 2018 over 2017.
What does this mean for U.S.-Turkey textile and apparel trade?
U.S. imports from Turkey, by the numbers. Total U.S. Textile & Apparel Imports in Millions Year-Ending June 2018 Square Meter Equivalents U.S. Customs (SME) Value YE YE % YE YE % Country Rank June ‘18 June ‘17 Change June ‘18 June ‘17 Change Turkey #12 856.40 769.67 +11.27 1,653.31 1,377.66 +20.02 Up from #14 in YE December 2017
U.S. imports from Turkey, by the numbers. U.S. Apparel Imports in Millions Year-Ending July 2018 Square Meter Equivalents U.S. Customs (SME) Value YE YE % YE YE % Country Rank July ‘18 July ‘17 Change July ‘18 July ‘17 Change Turkey #21 75.15 72.56 +3.57 567.60 492.57 +15.23
Some rapidly growing products from Turkey include… U.S. Apparel Imports in Million $USD Year-Ending July 2018 U.S. Customs Value Product HTS YE July ‘18 YE July ‘17 % Change MMF Slacks, Women’s/Girls’ 648 18.268 11.655 +56.74 Knit Shirts, Men’s/Boys’ 338 48.412 34.030 +42.26 Wool Slacks, Women’s/Girls’ 348 75.485 53.784 +40.35 Not-Knit MMF Blouses, Women’s 641 21.362 16.737 +27.63
In United States: a strong economy BUT concerns about cost, trade policy, finding sourcing base other than China + In Turkey: quality, experienced, cost- effective apparel supply chain = a huge opportunity for Turkey!
A final note… The industry is optimistic!
Samantha Sault Vice President of Communications ssault@usfashionindustry.com www.usfashionindustry.com @usfashion
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