US fashion brands and retailers are deeply concerned about the negative impacts of the tariff war on their businesses. Prices of US apparel imports are rising, making increasing production and sourcing cost the top business challenge. As companies are moving sourcing orders to Bangladesh, Vietnam and India, the average price of US apparel imports from these countries – the main alternatives to China — has gone up quickly. Trade diversion effect has accelerated US fashion companies’ pace of reducing sourcing from China. About 83 per cent of respondents expect to decrease sourcing from China over the next two years, up further from 67 per cent in 2018.

US companies feel they have no option but to increase their retail prices should the US-China tariff war escalate further. The scheduled Section 301 tariffs on $300 billion Chinese products to take into effect on September 1, 2019, will be increased from 10 per cent to 15 per cent.

Unit price of US apparel imports across the board increased 10.7 per cent in the first five months of 2019. The unit price of US apparel imports in the first five months of 2019 from Bangladesh, Vietnam and India shot up 25.6 per cent, 23.4 per cent and 21.2 per cent respectively.