As the trade war between the US and China shows no signs of reaching a solution, US brands producing in China, such as Victoria Secret, Abercrombie & Fitch and GAP, have been seeing their shares drop by up to 5% due to their high reliance on Chinese manufacturing. The expected 25% tariff on all fashion garments imported to the US from China will be passed on directly to the consumer which means a direct rise in retail price on any goods produced in China. Brands who have not diversified their production yet face now the challenge of finding production partners in neighbouring countries.
The average retail price of clothing manufactured in China was US$25.7 per unit back in the second quarter of 2018, only slightly higher than clothing from Vietnam. A year later, China’s cost more than doubled to US$69.5 per unit. The South China Morning Post cited a report that shows that China’s stranglehold on the garment supply chain continues, despite its price advantage being eroded rapidly. Why is this and is it true? From a perspective from inside Vietnam we can tell you that the factories are flooded with inquiries, many from Chinese factories moving their production to Vietnam. Why are the brands themselves not looking at Vietnam directly? These, are the late comers, rushing here now. They should have been doing this already – prices rising in China, trade tariffs or not, was expected. Just like the neighbouring countries have been expecting a rise in production in all sectors as China loses it´s competitive edge.