The textile and apparel industry in the US is deeply embedded in the global supply chain, heavily reliant on imports from nations like China, Mexico, and Canada. Recent developments, including proposed tariffs by former President Donald Trump targeting these key trading partners, have sparked concerns about an impending trade war.

Current import scenario

The US textile and apparel market depends heavily on imports, with China, Mexico, and Canada among its largest suppliers. China dominates the global textile market due to its vast manufacturing infrastructure and competitive pricing. However, its share in US imports has been declining as buyers diversify. The 10 per cent tariff on Chinese imports is seen as retaliation for alleged Chinese complicity in fentanyl smuggling and trade imbalances.

Mexico and Canada as USMCA members benefit from tariff-free or reduced-tariff trade. Their proximity enables faster delivery times, critical for just-in-time inventory strategies. The tariff that includes 25 per cent on imports from Mexico and Canada is being justified by incumbent US President Trump as a response to drug trafficking and illegal immigration. Meanwhile Vietnam, Bangladesh, and India are steadily capturing more of the US market, leveraging their expertise in cost-efficient manufacturing and niche products like knitwear and home textiles.

While the tariffs aim to address political concerns, their economic repercussions could be far-reaching.

Potential and economic impact

• Cost increases for US consumers: Tariff imposition would raise the landed cost of goods, translating to higher retail prices for textiles and apparel. Given that clothing is a staple, this could disproportionately affect low-income consumers, who spend a larger share of their income on necessities.

• Supply chain disruptions: Tariffs could compel businesses to rapidly reconfigure supply chains, potentially sourcing from Southeast Asian nations like Vietnam and Bangladesh. However, such shifts are neither instant nor cost-free, leading to potential delays and increased operational complexities.

• Retaliatory tariffs: Key trading partners, including Canada and Mexico, have hinted at retaliatory tariffs on US goods. Canada’s Deputy Prime Minister Chrystia Freeland noted that critical US exports—oil, minerals, and agricultural products—could face tariffs, escalating trade tensions and harming American industries.

• Domestic industry prospects: While proponents argue that tariffs could revitalize US textile manufacturing, the industry’s dependency on imported raw materials and machinery complicates this narrative. High production costs and limited capacity make it unlikely that domestic manufacturing could fill the gap.

Geopolitical reactions

The proposed tariffs have drawn sharp responses from all three countries. Canadan Prime Minister Justin Trudeau emphasized that retaliatory measures could jeopardize cross-border economic ties. Provinces like Ontario and Alberta have also raised alarms about the potential harm to their economies. Mexico’s President Claudia Sheinbaum criticized the move, underscoring that tariffs would strain bilateral relations and undermine efforts to address migration and drug issues collaboratively. China officials have warned of the dangers of a trade war, arguing that economic cooperation is mutually beneficial and that punitive measures would harm both economies.

Global implications

Countries like Vietnam, Bangladesh, and India could benefit from tariffs as US companies move away from China, Mexico, and Canada. However, their capacity to scale production to meet demand remains uncertain. Moreover, a shift in trade dynamics could further polarize global trade blocs, intensifying competition among emerging economies.

The tariffs, coupled with retaliatory measures, could also lead to significant volatility in global markets. Currency fluctuations, such as the recent depreciation of the Canadian dollar and Mexican peso, underscore the financial instability such policies can provoke.

The proposed tariffs on textile and apparel imports from China, Mexico, and Canada reflect a complex intersection of economic and political objectives. While they aim to address pressing concerns such as immigration, drug trafficking, and trade imbalances, the potential costs—including higher prices, supply chain disruptions, and strained international relations—are substantial.

As history suggests, trade wars rarely produce clear winners. The US textile and apparel industry, already grappling with global competition and evolving consumer demands, now faces additional uncertainty. Policymakers must weigh the short-term gains of protective tariffs against the long-term risks to economic stability and international goodwill. The key question remains: Can the US afford to unravel decades of trade integration in pursuit of contentious policy goals?