Sourcing costs top concern for US fashion industry

31 July 2019

Increasing production and sourcing costs due to tariff actions against China is the top concern for the US fashion industry in 2019, according to a report.  

In the United States Fashion Industry Association’s (USFIA) sixth annual Fashion Industry benchmarking report, businesses surveyed said sourcing costs had been pushed up by trade barriers, compliance with trade regulations, shipping and logistics costs and labour costs. 

In 2018, US fashion brands and retailers paid more than $12bn in tariffs on apparel and home textiles and $3bn on imported footwear. Meanwhile almost two thirds (63%) of businesses said the US tariffs imposed on China in 2018 had increased sourcing costs. 

The ongoing threat of tariffs by the Trump administration on China and more recently Mexico led to supply chain disruptions and heightened market uncertainty, the report said. 

In response many US fashion brands and retailers “have had to switch to suppliers that are more expensive or pay extra to move around their products”. 

However, the report said China will remain a dominant textile and apparel supplier for the US market for the foreseeable future as it does not have a near competitor in terms of the variety of products it can make.

While companies are looking to source from Bangladesh, Vietnam and India, the main sourcing alternatives to China, the cost of apparel imports from these countries has risen 20% in 2019 year-on-year. 

USFIA said growing costs are due to a “limited labour force, infrastructure, supply of raw material and production capacity” in these countries, which are facing a surge in sourcing orders from US companies. 

The report said there is no evidence to show US fashion companies are sourcing more from Western countries as a result of the tariff war. 

Julia Hughes, president of USFIA, said: “A majority of the respondents to the survey said that the 301 tariffs have increased sourcing costs. That is not surprising. But as we look at the data, we see some other insights that are very troubling. 

“Not just costs in China are increasing, but the costs to source in the main alternatives to China – especially Vietnam, Bangladesh and India – also are soaring. And the uncertainty seems to also affect logistics and transportation costs.”

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