How tariffs shifted clothing production from China to the rest of the developing world

in busy •  2 months ago

When China joined the WTO in 2001, clothing was one of the first things to be produced there, because labour in China at the time was so cheap that even with tariffs, it meant low consumer prices for items sold in Walmart and other stores.

Clothing is one of the few things that has had tariffs on imported items since the 1930 Smoot-Hawley Act. Footwear for example has an import duty of 11%. Import duty on men's coats is 28%. Import duty on pantyhose is 16%. For some reason these tariffs never got removed.

See the following graphic for 2015:

Therefore when wages in China began to rise, manufacturers started to look for other places they could manufacture clothes and shoes, that had labour costs similar to China in 2001.

If you look at the labels you will now see "Made in Bangladesh" or "Made in Vietnam". Only 41% of clothes imported into the United States now comes from China. The rest comes from other developing countries.

If Trump manages to get re-elected and thus his tariffs on other Chinese goods remain, watch as manufacturers do what they did in the clothing industry: move out of China to another developing country that not only has low wages, but does not have the tariffs that China is attracting. Long term this should strengthen emerging countries in Asia, Africa and South America, and weaken China.

Even if Trump doesn't get re-elected, the tariffs may remain if the new administration decides that yes, China is a problem and the tariffs are the best way of dealing with them.

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