Sino-US trade war + strong US dollar, how will the textile and apparel industry act?

With the advent of the Sino-US trade war, both China and the United States have made adjustments to import tariffs. So what impact will it have on China’s textile and apparel industry?

First of all, let’s take a look at our domestic situation. China will increase import tariffs on U.S. cotton, and last year’s Xinjiang cotton sales are coming to an end. This will cause the prices of domestic high-count cotton yarns and yarns with higher dyeing requirements to rise.

Secondly, let’s take a look at the United States. Although textiles are not included in the first batch of tax categories in the United States, textiles will definitely be included in subsequent tariff increases. And what impact will this have on our country’s textiles and clothing? We believe that conventional knitted and woven clothing made of cotton and chemical fiber may be greatly affected. These products have always been high-volume products with low added value. As tariffs increase, orders for these products may shift to Southeast Asian countries, and domestic companies will lose the U.S. market. For example, men’s cotton shirts account for about 14.5% of the market in the United States, while Vietnam already accounts for 12%. For woven cotton clothing, China’s market share in the United States last year was 22%, and Bangladesh’s market share reached 20%. The gap with China is constantly narrowing. After the tariff increases, I believe Vietnam and Bangladesh will quickly surpass us and become the main players in the US market in related categories. It is roughly estimated that 45% of textile products will be affected by the outbreak of the Sino-US trade war.

In terms of exchange rates, the strong trend of the US dollar may end in the third quarter. The final value of the US GDP in the first quarter was disappointing, which showed that the US economy is currently growing at an annualized rate of 2.0%, lower than the previously expected 2.2%. In addition, after the trade war begins, the American people, especially farm workers, will have reduced income and increased consumption. The U.S. economy will experience a slowdown in growth in the third quarter, thus ending the strength of the U.S. dollar. Domestically, under the current background of global resource allocation, as the RMB joins the SDR and the RMB internationalization continues to deepen, the central bank will intervene in the RMB at the appropriate time, so I personally believe that the RMB will return to below 6.4 before the end of the year.

In terms of environmental protection, my country’s environmental protection system has been greatly improved, and laws, regulations, policies, standards, etc. are becoming increasingly complete, which allows environmental protection to have rules and laws to follow in its future development. Echoing the intensity of policy introduction in the past, 2018 ushered in large-scale and all-round policy implementation. “The party and government have equal responsibilities and one post has dual responsibilities” is a major measure in the reform of the environmental protection system. In the future, the party and government “top leaders” with leadership responsibilities among local party committees, governments and affiliated departments will become the key targets of environmental inspections. This means that leading cadres will bear the primary responsibility for damage to the ecological environment due to mistakes in decision-making and low political standing. President Xi once made it clear: “You cannot make a mess of a local environment and then walk away, just as officials do, without taking any responsibility.” In the future, these two policies will undoubtedly be the strongest rules for protecting a place’s soil and water. Therefore, the days when the environmental protection team came and stopped for a few days, then left and then reopened will be gone forever.

In summary, under the current new situation, the textile and apparel industry should speed up transactions, adjust market distribution, especially the business proportion of customers (including other foreign customers in the United States), or price premium capabilities, and increase autonomy. Strengthen research and development to improve the competitiveness of products and itself to cope with new changes in the situation. Of course, while the European and American markets are sluggish, we should also pay more attention to the market in the “Belt and Road” regions. These countries and regions have enjoyed the benefits of the “Belt and Road” initiative and have a good impression and demand for Chinese products. I believe that China’s status as the largest country in textile trade is unrivaled. (Title: Sino-US trade war + strong US dollar, how will the textile and apparel industry act?)

AAA

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