Chinese textile manufacturers are shifting to the US. While labor costs are greater than that of China, energy, land and raw materials are cheaper in the United States. Therefore, total cost of production is less. Chinese manufacturers find the production cost per ton of textiles is 25 per cent lower in the US.
The cost of labor in China has been rising and other countries like the US could potentially do it better and cheaper. Labor would still be a lot more expensive. But energy costs could be notably less. These capital intensive textile mills have little labor costs and relatively cheaper energy prices.
Moving closer to the US benefits not only the upstream US supplies of textile components but also boosts the competitiveness of cut and sew operations in the NAFTA and DR-CAFTA regions, the US textile industry’s most important export markets. Moreover, tariffs would encourage more R&D focus on automating apparel assembly, technology showing very promising potential to re-shore jobs.
Unless China begins to automate its processes and to reduce its costs, it is inevitable more clothing makers will relocate to the US. And that will mean new investments in factories and machinery — if the tariffs were to go into place.