Trade war’s tariffs may spur relocation of some Chinese textile factories to other Asian nations

Beijing’s retaliatory tariffs on US cotton will accelerate the offshoring of cotton spinning and lower-end textile and apparel manufacturing to South and Southeast Asia, and Chinese businesses are bracing for possible US tariffs on their finished goods if the trade war intensifies, industry executives have said.

But for now, at least, fallout from Sino-US hostilities has been limited because Chinese manufacturers have ways to get around the added duties, said Stanley Szeto, chairman of the Hong Kong Textile Council.

“So far the cotton tariff has had a very small impact on the Chinese textile industry because there are various ways to avoid it,” Szeto said, referring to the 25 per cent additional tariff on US products, including cotton, that took effect on July 6.

The Trump administration’s tentative 10 per cent tariff – pending a public hearing next month – on US$200 billion of Chinese merchandise has so far not touched the vast majority of China-made textiles and garments, except for fur and leather apparel and accessories like hats, gloves and handbags.

“The tit-for-tat trade war and possible coverage expansion of trade barriers will, however, see Chinese firms look more closely at relocating their manufacturing capacity across the supply chain to countries like Vietnam and Bangladesh,” he said.