A significant shift is underway in the US fashion industry as a record number of companies are turning away from China as their primary supplier. Growing diplomatic uncertainty and mounting apprehensions about forced labor have triggered this change. According to a recent survey by the US Fashion Industry Association and Sheng Lu, around 61% of apparel retail CEOs have abandoned China as their top supplier, a substantial increase from the 30% reported before the pandemic.
The survey reveals that nearly 80% of these companies intend to further reduce their reliance on China over the next two years. Instead, they are shifting their sourcing operations to countries like Vietnam, Bangladesh, and India, which offer larger production capacities and more stable economic and political environments.
The enforcement of the Uyghur Forced Labor Prevention Act, which prohibits imports from China's Xinjiang region, and concerns about forced labor have added to the urgency for companies to diversify their supply chains.
Cotton products have been a particular concern, given Xinjiang's status as one of China's major cotton-producing regions. While breaking ties with China presents challenges for US fashion retailers, who have long depended on the region for efficient and cost-effective production, they are determined to navigate through this change.
The survey shows that managing forced-labor risks in the supply chain ranks as the second-largest business challenge in 2023, following inflation and economic outlook. US apparel imports from China have significantly decreased, falling to 18.3% in the first five months of this year compared to 30% in 2019.
In contrast, apparel imports from other major Asian suppliers like Vietnam, Bangladesh, Indonesia, India, and Cambodia have reached a new high of 44.3% during the same period.
While domestic production doesn't appear to be a primary pursuit for US apparel companies, many are adopting nearshoring strategies, with Mexico, Guatemala, and Nicaragua emerging as top fashion suppliers in 2023.
This shift underscores how the fashion industry is responding to the heightened economic and diplomatic uncertainties posed by China and reflects the industry's commitment to addressing forced labor issues in their supply chains.
