US fashion cos plan further China dependency cut: Study

US fashion companies plan to further cut their dependency on China due to the Trump administration's escalating tariffs and policy uncertainties, according to the findings of a survey.

"Far from surprising, many leading US fashion companies expressed concerns that the Trump administration's escalating tariffs have resulted in higher sourcing costs and cut companies' profit margins," the survey said.

"To mitigate these impacts, most companies plan to further reduce their 'China exposure,' maintain a geographically diversified sourcing base, and prioritise flexibility in sourcing and shipping," it said.

With the hiking tariff rate on US apparel imports from China and increasing strategic competition between the two countries, many leading US fashion companies plan to reduce their apparel sourcing from China to a single-digit, if not move out of the country entirely, it added.

Local exporters, however, see business opportunities, saying Bangladesh has the capacity to grab the possible shifted work orders with a competitive edge, provided it addresses internal issues like the energy crisis and other logistics-related barriers.

Dr Sheng Lu, a professor of fashion and apparel studies at the University of Delaware, analysed the available data and transcripts of the latest earnings calls from approximately 25 leading publicly traded US fashion companies between mid-May and June 2025, as well as covered company performances in the first quarter of this year.

The study aimed to examine the impacts of the Trump administration's escalating tariffs on US fashion companies' apparel sourcing practices.

It found no clear evidence that the current policy environment has successfully incentivised US companies to expand apparel sourcing from the Western Hemisphere, let alone commit to new long-term investments.

Meanwhile, US fashion companies have adopted a strategic pricing approach by not passing the entire cost increase to consumers through widespread retail price hikes.

Maintaining a geographically diverse sourcing base remains a popular strategy for US fashion companies to mitigate the impacts of increasing tariffs and ongoing policy uncertainties.

Companies particularly intend to avoid "putting too many eggs in one basket" and limiting the reliance on any single supplying country.

When asked, Fazlul Hoque, managing director of Plummy Fashions Ltd, said there is immense potential for Bangladesh amid the US existing flat rate of an additional 10 per cent tariff.

Exports would rise if Bangladesh performs better with efficiency and enhanced capacity, especially for value-added items, he said.

Mr Hoque, also a former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), however, said the prices of new orders of locally made apparels would increase, while the real prices offered by buyers would fall further, which is a challenge.

Also, India could be a new competitor for Bangladesh.

Despite the challenges, orders shifted from China can come here, but questions remain about the extent to which Bangladesh can grab the opportunity with the existing internal issues like the energy crisis, high bank interest rates, low efficiency, and incentive cuts.

Exporters said on average, local suppliers have to take the 50 per cent cost burden of the US enhanced tariff (additional 10 per cent), with the three-month pause ending on July 9.

Shovon Islam, managing director of Sparrow Group, said the growth in apparel exports to both the European Union (EU) and the US in recent months has shown that Bangladesh, followed by India and Pakistan, is one of the gainers from order shifts from China.

There is also a high potential to get higher chunks of the shifts, he said, raising questions about whether Bangladesh could and would grab the future share as the country still depends on imported raw materials, mostly for value-added items and manmade fibres (MMF).

There is no fresh investment to enhance capacity, especially MMF and other high value-added items, he noted.

The growth could be higher if garment makers get the required financial support from banks as they got earlier due to the tightening monetary policy and energy shortages, among others, said Mr Islam.

He alleged that exporters are in the dark over what would happen after July 9 as they get no clear message from the government about what measures it is taking or going to take over the new US tariffs.

Besides, he said about 15 per cent of work orders for the spring season have been kept on hold, while he received 10 per cent fewer orders for the holiday season, mostly Christmas.

That is why they could not communicate with buyers in this regard, he noted. Sayeed Ahmad Chowdhury, director of operation at Square Denim, expressed concern as to how much of the shifting orders from China Bangladesh could grab, saying the country has lost a good volume of production capacity due to the closure of several vertically integrated groups of companies, including Beximco, Nassa, and Mahmud.

Stressing capacity enhancement, he said many factories, especially textile units located in Bhaluka and Gazipur, cannot use their full production capacity due to poor energy supply.

Factories mostly having relations with "weak banks" are still struggling to open letters of credit (LCs) while infrastructure and other logistics issues finally resulted in an increase in lead times, he added.

Data shows China's share in the US market in 2013 was 37.7 per cent, which decreased to 21.3 per cent in 2023.

In the meantime, Bangladesh's share rose to 9.0 per cent in 2023, which was 6.0 per cent in 2013.

Vietnam grabbed 17.8 per cent of the US apparel market in 2023, up from 10 per cent in 2013. India's share stood at 5.8 per cent in 2023, which was 4.0 per cent in 2013.

Cambodia and Pakistan's shares stood at 4.3 per cent and 2.6 per cent, respectively, in 2023, which were 3.2 per cent and 1.9 per cent in 2013.

Munni_fe@yahoo.com