The U.S.-China trade tensions that escalated under the Trump administration profoundly impacted China’s textile and apparel industry. The policies implemented primarily through tariffs disrupted supply chains, forced companies to adapt sourcing strategies, and reshaped the global apparel trade landscape. Examining the long-term effects, adjustments within the industry, and the broader economic implications…an analysis below. c Impact of tariffs on trade volumes and prices

During the Trump era, U.S. tariffs on Chinese imports included up to 25% tariffs on textiles and apparel, which led to a significant reduction in U.S. imports from China. By 2022, China’s share in the U.S. apparel market dropped as companies sought lower-cost alternatives in Vietnam, Bangladesh, and other Southeast Asian countries. This shift is reflected in data showing that countries outside China increased their U.S. market share from 41.2% in 2018 to over 51% in 2022, with Chinese imports largely focused on premium segments where consumers were less sensitive to price increases. For example, items like high-end coats and outerwear continued to be sourced from China, while lower-end products were shifted elsewhere.

Shift in supply chains and "Tariff Engineering"

The tariffs pushed companies to diversify their supply chains, a strategy known as "China Plus One," which involved sourcing from China alongside one or more other countries to mitigate risks. Additionally, many U.S. companies resorted to "tariff engineering," modifying designs to achieve lower tariff classifications. For instance, adding features to a garment, such as pockets, could reduce the applicable tariff rate. However, tariff engineering and supply chain diversification require substantial investment, creating challenges particularly for small and medium-sized businesses.

Retaliatory actions and market challenges

In response to U.S. tariffs, China imposed retaliatory tariffs on American imports, further straining trade relations. For China’s apparel industry, which relies heavily on the U.S. market, these reciprocal tariffs intensified the need for market adaptation. Companies faced increased costs not only from the tariffs themselves but also from retooling and repositioning products for markets with less exposure to U.S. tariffs.

Impact on global apparel industry and U.S. retailers

The tariffs impacted not only Chinese manufacturers but also U.S. retailers dependent on low-cost imports. The National Retail Federation estimated that American consumers faced billions in additional costs due to increased tariffs, ultimately affecting retail prices. Moreover, even after Trump, the Biden administration continued many of these tariffs as leverage in trade negotiations, signalling that these changes could be long-term. This uncertainty has led many U.S. brands to prioritize building resilient, diverse supply chains to avoid dependency on any single region.

China’s transition to premium manufacturing

A notable case study is China’s shift towards higher-end production to maintain profitability amid rising costs and tariffs. By focusing on premium products, Chinese manufacturers retained demand in sectors less impacted by price sensitivity, such as luxury and designer apparel. This transition highlights China’s evolving role, moving from low-cost mass production to higher-quality, higher-margin goods that cater to more affluent markets, helping offset some losses due to reduced volume in lower-end segments.

Trump’s policies accelerated shifts in the global apparel industry, with lasting effects on China’s textile sector. While diversification provided resilience, increased costs and strategic adjustments marked a challenging period for both Chinese exporters and U.S. retailers. The ongoing U.S.-China trade complexities suggest that the textile and apparel industries will continue to navigate these dynamics, likely shaping a more fragmented and resilient global supply chain landscape.