With the evenings getting darker earlier and temperatures beginning to cool, it can only mean one thing: Cashmere season is coming.
Once a luxury only the well-heeled could afford (think twin-sets paired with pearls), cashmere is now available at almost every price point thanks to deals from a number of retailers.
A quick hop around some shopping sites found that at Everlane, the San Francisco-based direct-to-consumer retailer, a woman’s cashmere sweater is priced at $100; at Uniqlo, it’s $89.90, and at H&M they can be found for $35.99. The list goes on.
And while some retailers like Asos have banned the sale of clothing containing cashmere and H&M plans to phase out conventional cashmere due to sustainability concerns, business is still booming, with the U.S. importing $362 million worth of cashmere sweaters last year.
But like other consumer-facing industries, the sector is about to face cost pressure as the Trump administration is preparing in mid-December to impose 15 percent tariffs on all remaining Chinese imports of apparel and footwear that have yet to be targeted, including cashmere sweaters.
This is likely to have a significant impact, since American retailers are particularly reliant on China for production, with over 80 percent of imported cashmere sweaters coming from the Asian giant in dollar terms last year.
“It’s the single largest source,” said Mark Engebretson, executive vice president of operations at Vince Holding Corp., the apparel, accessories and footwear firm for which cashmere is a vital part of its business. “There are obviously so many price points in cashmere, but better cashmere is in Europe — in Italy — or it’s going to China. Those are your options and European pricing obviously is greater.”
With duties set to rise from the low level of 4 percent to 19 percent, many will have little choice but to raise prices or swallow the cost, taking a financial hit.
Bruce Gifford, the founder and chief executive officer of direct-to-consumer e-commerce brand Naked Cashmere, which recently launched a collaboration with actress and model Camila Morrone, thinks the first option is most likely.
“I think anybody that in the long run says that they’re not going to be raising prices is just lying to you. You have to make a certain amount of money to stay in business,” he told WWD.
For now, Gifford and other retailers across the country are no doubt hoping that newly scheduled trade talks between China and the U.S. due to take place next month in Washington, D.C., could result in the planned tariffs being put on ice. This has happened before, only for talks to fall apart and for tariffs to be put back on the table — sometimes higher than originally planned.
That’s why a bill that some representatives are currently trying to pass through Congress comes at a pivotal time for cashmere retailers and has piqued the interest of a few.
The so-called Mongolia third neighbor trade agreement — which Mongolia’s President Khaltmaa Battulga discussed with President Donald Trump during the former’s recent visit to Washington, D.C. — proposes that companies could import high-end Mongolian cashmere duty-free to the U.S. for a five-year period.
The hope is that if passed, the bill would help to create an industry in Mongolia where cashmere goods can be fully produced, instead of the wool largely being sent to China for conversion into yarns and finished products.
“About 90 percent of their cashmere goes to China,” said Steve Lamar, executive vice president at the American Apparel & Footwear Association. “This legislation is about do we want our Mongolian cashmere to come to us through China or do we want Mongolian cashmere to come to us through Mongolia.”
For Vince’s Engebretson, the prospect is an interesting one. “From a pure sourcing perspective, it’s just something that makes sense and should be looked at,” he said. “A very large portion of our business is centered around cashmere. With recent events with China, anything China-made is risky at this point and continues to be risky until we have any kind of a deal. Our ability to diversify in cashmere is extremely limited. In fact, a pretty good argument could be made that Mongolia is really the only other place.”
He stressed, however, that the Mongolian cashmere industry isn’t currently ready to go and that with a population of around 3 million, it could never compete on the same scale as China. But for some retailers it could represent an interesting alternative.
“They have some work to do. I don’t want to say this is plug and play. This [proposed] agreement lasts five years and we’re going to need time to get them prepared for the U.S. market and quality levels required and all the restrictions and compliances. But the base is there and it’s a really interesting opportunity that I haven’t seen for a long time,” he added.
Elsewhere, Matt Scanlan, cofounder and ceo of Naadam, is watching developments closely.
His direct-to-consumer, sustainable cashmere label launched in 2015 and while he purchases cashmere directly from Mongolian herders, a lack of facilities means he has to cross the border into Inner Mongolia to produce the final product.
“In terms of spinning and actual knitting and cut and sew, we do a lot of that just over the border in Inner Mongolia as there aren’t the facilities and processes existing in Mongolia today to support the preferences of the U.S. customer. So that kind of happened not out of desire, but really out of necessity,” he said. “I would love to see those processes get developed in Mongolia.”
Not everyone is convinced that this could ever be a viable option, though.
Leading the list of skeptics is the National Council of Textile Organizations, with a spokeswoman telling WWD that it has serious concerns about the bill.
“Various versions of the legislation allow for 50 percent of the value of the finished textile or apparel item to be produced outside of Mongolia. Due to proximity and well-established relationships with Chinese manufacturers, China will certainly partner with Mongolia in the production of garments that receive duty-free treatment under this proposal,” she said. “This fact contradicts a key motivation for the legislation, which is to drive textile and apparel-related jobs and investment from China.”
But if the trade dispute between the U.S. and China continues to escalate and the Trump administration moves to impose levies higher than 15 percent on the industry, Mongolia may soon look very attractive to many, even though there is much work to be done before it could become a bustling cashmere production hub.
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