Will the fashion industry survive being hit by Trumps tariffs?
In an effort to ‘make America great again’, United States President Donald Trump has imposed a 25 per cent tariff on $35bn worth of Chinese goods being imported by the US. All is aimed to stimulate the American market by making products and produce from America financially more appealing. Products that are affected by Trumps tariffs range from ball bearings to nuclear reactors. The Trump administration is now preparing another round of tariffs on thousands of products, worth $200bn. So far, the fashion industry has been spared by the ongoing trade war between The United States and China. But for how long?
China is the largest exporting economy in the world, with a total of $2.27T worth of products in 2016 (Observatory of Economic Complexity, 2017). A massive player in the production and export process in the fashion industry. Exported apparel, head and footwear account for $294bn (OEC, 2017) ,of which, $50bn is exported to the US in the last year (Bloomberg, 2018).
If the Trump Administration decides to add apparel to the list of products, not only will fashion companies pay the price, consumers will have to spend more than they are used to. The possibility of approaching tariffs targeted towards the apparel retail industry give us an opportunity to reflect on the way the production process is conducted. In the past decade, the production and sourcing caravan has moved around Asia and Africa and wherever production was cheapest, they would settle. But everything comes with a price tag and in this case it means that the fashion industry ended up on the number 2 spot of the Global Slavery index 2018. Every year the Walk Free Foundation conducts research on products that have a high risk of being produced through modern slavery practices. Countries like China, Bangladesh, India and Ethiopia are all cheap labor countries where laborer’s are at risk of being used as modern slaves in factories or sweatshops. Modern slavery is also a feminist problem, as 71% of modern slaves are women and children. Is your t-shirt starting to itch already?
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What if we all bring back production factories from low wage countries and locate them close to the headquarters of the fashion brands. Would we be able to handle the short time to market, the lower lead time and the ability to provide consumers with garments they actually want to buy and wear? Inditex, the Spanish parent company of Zara, Bershka, Massimo Dutti, Stradivarius and others, has mastered this technique. Combine this with innovative technologies in the design, communication and sales process, and we have got ourselves an industry that is ready for the future. Proving that innovation in the fashion industry, and in general, pays off. Big time.
The only down side of this scenario is the fact that consumers need to get used to higher prices. But is that really too much to ask if results in a reduction of modern slavery, less discarded clothing and less emission due to less transport? After all, we do not mind to pay a few bucks extra for an organic vegetable or piece of meat.
In an industry where cutting down prices to, satisfy consumers who are used to paying less and less, is one of the biggest priorities, things need to change. The current model is anything but sustainable. If things stay the same and Trumps tariffs hit the fashion retail industry, it will send a lot of companies in a state of emergency. Even if the industry won’t be hit, consumers need to understand where the low prices they have come to live come from and fashion companies need to look further ahead and adapt. Let’s make fashion great again.