Phase one trade deal between US and China unlikely to relieve apparel companies

By

Robin Driver

Published
Jan 23, 2020

Despite hailing the “phase one” trade deal signed by the U.S. and China on Wednesday, January 15, as “a step in the right direction,” experts from GlobalData report that it will “offer little relief to apparel firms” caught up in the middle of the ongoing trade conflict between the two countries.

 
First announced at the end of last year, the deal addresses the punitive tariffs that the U.S. has imposed on Chinese imports since 2018, among other issues including intellectual property and technology.
 
Specifically, in terms of apparel, the additional 15% tariffs that were introduced on Tranche 4A goods (a category that includes most of the U.S.’s garment imports from China) in September of last year, will be reduced to 7.5% as of February 14.

Further tariffs on the majority of remaining garment imports from China, set to come into force on December 15, have also been suspended.
 
According to GlobalData, however, these measures are unlikely to make a significant enough difference for many U.S. apparel companies who rely on Chinese imports.
 
“The ‘Phase One’ agreement is a long-awaited move after almost two years of trade tensions, but brings only limited respite for US apparel and footwear importers,” stated GlobalData apparel analyst Leonie Barrie in a release. “The truth of the matter is that punitive tariffs still remain on 92% of the clothing shipped from China to the US.”
 
As part of the deal, China has also said that it will increase its purchases of products from the U.S., including cotton, and will import more U.S.-made spinning, weaving and knitting machines.
 
China’s retaliatory tariffs on imports of cotton, hides, leather, textiles, shoes and clothing from America, however, will remain in force.
 
As of yet, no official timeframe has been given for continued negotiations between Washington and Beijing, despite pressure from a number of industry groups to find a resolution for the trade war and remove punitive levies.
 
GlobalData also points out that there are worries that other tensions between the world’s two largest economies could boil over, resulting in further punitive measures. China’s treatment of the Muslim minority in Xinjiang, a region producing more than 80% of the country’s cotton, is a particular cause for concern.
 
“The lingering uncertainties in all these areas will continue to weigh on global clothing and footwear supply chains into the future,” added Barrie. “With a complete rollback of U.S.-China tariffs unlikely in the coming months, U.S. brands and retailers will continue to face challenges as they try to plan their sourcing strategies for the seasons ahead.”
 
If the tariffs imposed as part of the U.S.-China trade war weren’t enough, the Trump administration is also weighing up the introduction of further duties on imports from Europe after the 25% tariffs it brought into force on some apparel imports from the bloc at the end of last year.