Choppy waters are ahead for the “Made in USA” movement. Under President Trump’s proposed China tariffs, American brands that locally produce goods could see higher price tags on Chinese-made cut-and-sew equipment, which are integral to the manufacturing process.
While industry stakeholders are pleased that the Trump Administration did not impose tariffs on Chinese imports of footwear and apparel, there is concern that tariffs on the Chinese-made equipment will throw a sabot in the works of the “Made in America” trend. Moreover, some are concerned that tariffs on steel and other products will hurt overall consumer spending as a broad number of products and services can see higher end-user costs. It’s a lose-lose for shoppers.
Meanwhile, the issue of tariffs on Chinese-made manufacturing equipment puts a spotlight on other providers, who naturally claim their textile and leather-cutting hardware and software is a better choice.
The timing of this imposed tariff comes as the American Apparel & Footwear Association sees “Made in the USA” as poised for robust growth — driven by consumer demand and the will of manufacturers. But there are hurdles in the movement, which include high production costs that shoppers are often reluctant to pay.
“The movement will take a hit, and it’s not just the 301 tariffs, it’s the tariffs that came in on steel and aluminum. Then you’ve got the added hit of tariffs that would be applied to the equipment that’s coming in — a lot of that equipment and machinery is used in [the fashion apparel and footwear] industry,” explained AAFA executive vice president Steve Lamar.
“There are some things that stand out — embroidery machines, knitting machines for hosiery, there’s activity in the United States — there are manufacturing jobs [required to operate the equipment]. The main or significant source of the equipment that’s used to support those jobs comes from China,” Lamar explained. “If you’re adding a tariff to those products, that tariff will have to be paid in the United States by the manufacturers or the importers of those products. Tariffs will be a hidden cost on consumers and U.S. manufacturers who are importing the machinery for those jobs.”
Lamar expects small U.S. brands to be particularly hit hard by the tariffs. Larger firms could pass costs along or endure heightened prices of manufacturing machinery – flexibility that small brands lack, he suggested. Brands that rely on single sources or product lines might fold under the tariffs. “If those lines get hit or if those sales markets dry up because of the cost pressures, they might not be able to withstand it. It could be an event that could wipe out a lot of small businesses,” Lamar said.
Trump’s tariffs landed just as the AAFA was touting the need to alter the definition of U.S.-made goods as a way to lure more consumers into making purchases. The AAFA wants to change the “all or virtually all” Made in the USA standard to one that allows for more imported materials used in the creation of apparel, shoes and travel products. It’s similar to how imported components are used in “U.S. manufactured” cars and trucks.
It’s important to note that for apparel, the Federal Trade Commission’s rules are currently more flexible — although the AAFA still describes them as “too restrictive.” However, the greatest restrictions are with footwear and travel goods. In a letter sent to the FTC this past February, Rick Helfenbein, president and chief executive officer of the AAFA, said, “At a time when U.S. manufacturing is on the resurgence, we believe the case presents a renewed opportunity for the FTC to clarify the meaning of the ‘all or virtually all’ standard.”
The AAFA noted that two percent of all apparel and shoes and one percent of travel goods are made domestically. “However, both business demands (fast fashion, quick turn, custom product) and growing consumer interest in Made in USA have encouraged our industry to explore an increase in U.S. manufacturing,” Helfenbein noted. “In fact, U.S. manufacturing of shoes and clothes has grown by over 60 percent since 2009.”
Helfenbein explained that U.S. manufacturers supplement American-made materials with imported materials. For apparel, current rules enable “some U.S. apparel production to be labeled with an unqualified ‘Made in USA’ label provided certain specific input items are also manufactured in the United States,” Helfenbein said “Although it is still too restrictive in our opinion to stimulate more U.S. apparel manufacturing, this approach at least represents one method of providing a degree of certainty to the industry.”
For U.S. manufacturers looking to buy apparel textile and/or leather-cutting equipment, the market is flooded with options, which include new and used equipment. Machinery manufacturers are located in Europe and Asia, and prices vary from several thousand dollars for simple cutters to hundreds of thousands of dollars for automated, and software integrated, machines.
On alibaba.com, a search for “apparel cutting machines” resulted in 987 suppliers. The top results included companies such as Guangdong Ruizhou Technology Co. Ltd., Jinan King Rabbit Technology Development Co. Ltd., Wuhan Tianming Photoelectric Technology Co. Ltd., Shenzhen BOK Investment Co. Ltd. and Tianjin Richpeace Computer & Machinery Co. Ltd. In the company profiles of these suppliers, Alibaba included annual sales volumes and markets served. A scan of the results showed most of the suppliers sold machines domestically with varying percentages sold in Western Europe, South America, Central America, Africa and other regions in Asia.
Some of the apparel-cutting machine suppliers selling to North America included Jinan King Rabbit Technology Development Co. Ltd. with 20 percent of sales there; Guangzhou Yinghe Electronic Instruments Co. Ltd. with 30 percent of total revenue from North America, and Perfect Laser (Wuhan) Co. Ltd. with 11 percent.
Non-Chinese makers of these machines differentiate their products by offering a higher-level of service and more advanced technology. Bill Grindle, chief marketing officer at Gerber Technology, said his company’s solutions “are differentiated in the market through the breadth and interconnectivity of our solutions and the knowledge and customer-driven approach used in product development.”
“Gerber’s product teams have extensive industry experience, their knowledge combines with a process that includes voice of the customer input from some of the world’s leading brands,” Grindle told WWD. “The sheer size and strength of our customer base ensure we continue to develop solutions which have industry best practices baked in. Gerber’s solutions cover the full range of the textile value chain, managing the efficient flow of data from design and development all the way through the production process.”
“At first glance, this move could very well be seen as a roadblock for domestic production. However, the reality is that not all innovative apparel manufacturing solutions come from China,” said Jason Adams, president of Lectra North America. “From our perspective, this is an opportunity for domestic manufacturers to think outside of the box and discover new technology partners and new options for innovating, upgrading and automating their cutting rooms.”
Under the tariffs, consumers could stand to lose out, too. Dean Gerber, president and chief executive officer of the technology industry trade group ITI, said in response to the tariffs, “If history is any indication, these proposed tariffs will not work and will be entirely counterproductive. Tariffs penalize U.S. consumers by increasing prices on technology products and will not change China’s behavior. Instead, the administration should act consistent with international obligations and work with other countries to address systemic issues with China.”
ITI recently led a group of over 45 business associations to discourage President Trump not to implement tariffs on China. The letter detailed how the tariffs will potentially dismantle the operations of American companies, consumer spending, and the economy — product prices will hike up and U.S. exports will be impeded.
“Consumers get hit a couple of different ways. They get hit as they consume a finished product that’s imported. Luckily, no apparel, footwear, or travel goods were included on the list, but a lot of products that you use in your home were. Consumers are bound to see prices on those products increase,” said Lamar. “Secondly, when you look at consumers who are buying products that are going through the U.S. manufacturing supply chain and that U.S. manufacturing supply chain is exposed to additional costs, then those costs will work their way to the finished product as well.”
The job market might take a hit, too, which could further reduce spending on domestically produced items. “Consumers who then put on their worker hat may take another hit if they’re employed in one of those industries that’s on one of the retaliation lists. If you’re employed in one of those industries you might see your job affected, because now the market opportunities for the sales of those products might diminish in China,” Lamar said.
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