Forget the detail-orientated and wonkish sourcing executives who have traditionally seen to the industry’s supply chain nuances, fashion companies need time travelers in the age of President Trump.
According to the latest check from the Commerce Department, January apparel imports shot up 10.7 percent from a year earlier, to 2.4 billion square meter equivalents. That’s a big swing given that apparel imports fell 1.1 percent to 26.9 billion square meter equivalents for all of last year.
At least a part of that surge could have come from importers rushing to get goods into the country before Trump was able to move on his “America first” agenda, which is heavy on protectionism and stronger borders.
But Nate Herman, senior vice president of supply chain at the American Apparel & Footwear Association, said the gain in January imports was more indicative of how companies were feeling when they placed orders last summer and what the consumer mood was like during the fall.
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But that was ages ago now in the whirlwind that is the Washington policy machine. Trump, who during the campaign threatened to levy of tariff of as much as 45 percent on goods from China, has proven that he’s willing to break sharply with custom as he seeks to remake Washington. Lobbyists, such as the AAFA, have zeroed in a border adjustability tax (BAT) in a House of Representatives blueprint that would lower the corporate tax rate, but extend that rate to the cost of imported goods. That would lead to a significant net tax gain for many importers.
“There’s a lot of uncertainty now regarding trade issues,” Herman said. “That uncertainty did not necessarily exist when these orders [that arrived in January] were placed, and consumer confidence was higher.
“Because of the current uncertainty, the numbers might be impacted going forward, but right now, this is still reflecting a more positive view of things and a growing economy,” he said.
Herman noted that 97 percent of all apparel is made abroad and that there’s no easy way for fashion, which supports 4 million jobs in the U.S., to suddenly change course and make more goods at home if tax policy or tariffs change.
A dramatic policy shift would leave brands to either pass the higher costs onto consumers or take crippling losses.
So far, the President hasn’t signaled whether or not he supports a border adjustability tax, but changes are on the way.
The new Commerce Secretary, Wilbur Ross, introduced himself to the department’s 47,000 workers last week by saying: “President Trump has already given us at the Department more responsibility than ever before….We will be more involved with rebalancing a trade system that has gutted American manufacturing and left families across America without work and without hope.”
He noted the Department would “play a major role in renegotiating bad trade deals” and seek to “institute a system of both free and fair trade that protects American workers and American companies.”
Soaring rhetoric and promises to make big changes are nothing new in Washington. However, the Trump administration’s willingness upset the status quo — and quickly — is new and unprecedented.
That leaves the fashion executives placing orders today to bring goods into an unusually uncertain world.