What Coronavirus Means for America’s Clothiers
In December, when news first surfaced out about the novel coronavirus spreading in China, few Americans realized the potential effects it could have. But in the manufacturing capital of the world, the forced shutdowns were felt immediately.
China becomes a powerhouse
In the 1960s, about 95 percent of apparel worn in the United States was manufactured in the United States.
Today, that number is estimated to be 2 percent, according to the American Apparel & Footwear Association (AAFA).
The United States’ apparel manufacturing industry has taken a massive hit as jobs quickly shipped to China for its low labor and materials costs. From 1990 to 2011, American employment in the sector went from 900,000 to 150,000:
In 2017, the United States’ exports of clothing were $5.7 billion compared to China’s $158.4 billion.
What used to be a strong muscle in the American economy has shrunken substantially in a now-global network. Last August, the People’s Bank of China set the reference rate of the yuan below seven per one USD for the first time in over a decade. China’s currency devaluation and often-criticized labor laws (or lack thereof) have allowed it to become the world leader in apparel exporting. But, it hasn’t gone unnoticed.
Trump’s trade war
President Trump—who campaigned on setting high tariffs on countries including China and Mexico—has enacted a series of battles with Chinese president Xi Jinping. It was announced on August 1, 2019 that a new 10 percent tariff would be imposed on approximately $300 billion worth of Chinese goods.
The AAFA calculated that 77 percent of all apparel, footwear, and home textiles would fall under the that category.
In an attempt to protect American workers, these taxes have caused controversies for U.S.-based brands that have had to raise prices. J.P. Morgan estimated that the tariffs would cost American households $1,000 per year. And brands like Columbia Sportswear said they may need to raise prices due to the increased taxes.
Bringing it back home
A 2015 Quartz article titled “US fashion companies are starting to look beyond China for sourcing apparel” was an insight into the coming industry shift. The report stated that “…as Chinese production costs begin to creep up, American brands are scouting out other options, primarily in Vietnam, India, Indonesia, and even the US itself.” In 2020, that reversal has been sped up as Chinese manufacturing has slowed down.
Even amidst the historic trend away from domestic production, brands like American Apparel (sold in 2017), Los Angeles Apparel (founded by American Apparel founder Dov Charney), and Buck Mason have popped up with an American-pride mission.
Coronavirus may give established retailers, up-and-coming labels, and idea-phase brands all the more reason to keep production in the United States. Los Angeles, the t-shirt capital of the country, has been in overdrive making face masks for the country.
…it is apparent that the fashion industry is just at the beginning of its struggle. By causing blows to both supply and demand, the pandemic has brewed a perfect storm for the industry: a highly integrated global supply chain means companies have been under immense strain as they tried to manage crises on multiple fronts as lockdowns were imposed in rapid succession halting manufacturing in China first, then Italy, followed by countries elsewhere around the world.
The reliability, control, and quality of a United States supply chain may be enough to compete with the volume and cost of the Southeast Asia factory empire.
Keep your eyes open for more “Made in USA” labels… and with it, higher prices.