The waiting game has begun for the U.S.’s fashion industry.
As the trade dispute between the U.S. and China escalates from a war of words to a reality with tariffs set to take effect Friday, concerns are growing over how long fashion can stay out of the fray.
The sector has successfully avoided a direct hit by the first wave of levies on $34 billion worth of Chinese imports that were ready to be triggered just after midnight, as well as duties on another $16 billion earmarked for a unspecified later date.
However, the worry is what will be President Trump’s next move. Neither he nor China’s President Xi Jinping appear ready to stand down in the tit-for-tat trade war.
Trump has already pledged to slap tariffs on $200 billion worth of Chinese imports if China retaliates and is ready to double that if the situation worsens, pushing the total amount of imports that could be hit to $450 billion.
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This would make it almost impossible for the fashion industry not to be impacted and would likely mean higher costs to bring goods across the border and steeper prices for consumers.
Just hours before the first batch of duties came into force, the National Retail Federation urged the administration to abandon its plans for additional tariffs on Chinese imports, arguing that they would destroy thousands of American jobs and raise prices on virtually everything sold in stores.
China is vitally important to the industry, with government data showing the U.S. imported $27 billion worth of apparel from the country last year, accounting for 34 percent of all apparel imports. That is more apparel than was imported from any other country, dwarfing second-place Vietnam at $12 billion.
“Reining in China’s abusive trade policies is a goal shared by many countries, but a strategy based on unilateral tariffs is the wrong approach and it has to stop,” said Matthew Shay, president and chief executive officer of the NRF.
The fashion industry may not be waiting too long to see if they’re dragged into the trade war as China has pledged to hit back in mere hours. Gao Feng, spokesman for China’s commerce ministry, said, “If the U.S. side takes measures to impose tariffs, China will be forced to hit back to safeguard the nation’s core interest and public interest.”
“The U.S. side has made similar threats to other countries and regions,” he said. “Such trade bullying acts are against the trend of the times. China will not bow its head before threats and extortions, neither will China waver in its determination to safeguard the global free trade and multilateralism.”
U.S. investors managed to shrug off the escalating situation. The S&P 500 ended Thursday up 0.9 percent at 2,736.76, while the Dow Jones Industrial Average closed up 0.8 percent at 24,358.03. Among the gainers were Nordstrom Inc., up 3.5 percent to $53.12; J.C. Penney Co. Inc., 2.6 percent to $2.39; Hanesbrands Inc., 0.5 percent to $22.26, and Nike Inc., 0.3 percent to $76.55.
In recent weeks, markets have been roiled by the situation, but investors took solace in hopes the trade dispute between the U.S. and Europe, which started with U.S. duties on steel and aluminum imports, could at least improve.
This all came as minutes to the Federal Reserve’s latest policy meeting showed that policymakers were becoming more concerned about trade policy, but that the issue was unlikely to change their plans to continue with their succession of gradual rate rises.
The head of Britain’s central bank seemed more concerned. Speaking at an event, Mark Carney, the governor of the Bank of England, warned that if the U.S. increased its tariffs against all its trading partners by 10 percent, it would knock 2.5 percent off U.S. output.