Matt Townsend
While there’s no shortage of doom and gloom coming from corporate America about President Donald Trump’s trade war with China, there is at least one U.S. industry cheering him on: textiles.
After decades of shedding thousands of jobs and closing factories as the U.S. opened up trade with China and other countries, textiles stabilized in recent years. And just as the sector was trying to invigorate growth, along came a presidential candidate pledging to revive American manufacturing.
The industry immediately saw Trump’s election as the best chance in a generation to reorient U.S. trade policy. And so far he hasn’t disappointed. The president withdrew America from negotiations on the Trans-Pacific Partnership (TPP) trade deal in his first week on the job. Now he’s enacted tariffs on $36 billion of Chinese-made goods, including some textiles, and wants to push that to $250 billion.
But the industry wants more. Textiles -- like fabrics and yarns -- are the materials used to make everything from clothing to seat belts. And duties on end, or finished, apparel and other goods from China would help domestic manufacturers compete better on price with Chinese companies and generate more orders for U.S.-made textiles, industry leaders say. Trump, however, largely avoided targeting consumer products for fear of upsetting voters who could face higher prices at the mall.
Crediting Trump
“We’ve got to do something to level the playing field with China,” said Michael Woody, chief executive officer of Trans-Tex LLC, a Cranston, Rhode Island-based maker of lanyards and shoelaces. “I give the president credit for trying to make something happen. For a U.S. manufacturer like my company, we want to see tariffs on end products.”
Placing duties on finished items is anathema to U.S. retailers and consumer brands that rely on Chinese goods, including $28 billion worth of apparel last year, to keep prices low for shoppers. They say levies will only increase price tags, and ultimately cost jobs.
The Trump administration largely avoided hitting consumers in the first round with 25 percent duties -- mostly on machinery -- that went into effect July 6. China matched those with retaliatory levies on goods from soybeans to electric cars, like Teslas.
Just four days later, the president responded with a proposal to put 10 percent levies on $200 billion of imports that included end products like handbags, baseball gloves and air conditioners. Also on the list were dog leashes, a smaller part of Trans-Tex’s business that Woody called “good news.”
And while apparel was spared, Trump has threatened putting tariffs on all Chinese imports, which last year totaled half a trillion dollars. That’s raised alarm bells around corporate America. Rick Helfenbein, president of the American Apparel & Footwear Association with members like Gap Inc. and Macy’s Inc., has started calling the proposed duties a “Trump tax.”
Consumers to Pay
“This will not do anything to help American workers, American consumers, or American businesses,” Helfenbein said in a statement after the $200 billion list was announced. “This will result in inflationary costs throughout the supply chain, ultimately paid for by American consumers.”
The textile and apparel manufacturing industries have little sympathy for companies railing against starting a trade war with China. It points to the U.S. opening up trade with China beginning in 2000 and China’s entrance a year later into the World Trade Organization -- thanks to the backing of then-president Bill Clinton -- as ushering in an era of domestic decline that has cost their sectors almost 800,000 jobs.
“To the retailing and importing community, guess what -- this is what President Trump campaigned on,” said Lloyd Wood, director of public affairs for the National Council of Textile Organizations. “They knew this was coming. If you chose to keep all your eggs in the China basket, that’s a risk you are knowingly taking.”
‘Quite Positive’
Since Trump was a candidate, he’s criticized America’s trade deficit with China, which reached a record $375 billion last year. If he’s serious about reducing it, obvious targets would be textiles and the products made from them. In 1999, the U.S. imported $8.5 billion worth of textiles and apparel from China, and only exported about $176 million there. Shoot forward to last year, when the U.S. imported $45 billion of those products from China, and exported less than $1 billion. That’s a trade gap of about $44 billion just for textiles and apparel.
That’s why Trump’s election generated so much optimism in the industry. In January 2017, shortly after Trump was sworn in, Chief Operating Officer Thomas Caudle of Unifi Inc. -- one of the largest U.S. yarn and fabric producers with about $670 million in annual sales -- said it has the “potential to be quite positive for us.” The president’s decision to pull out of the TPP would also save money for the company, located in the heart of what’s left of the U.S. textile industry in Greensboro, North Carolina. Unifi declined to comment for this story.
Shift West?
Since then, Trump’s saber-rattling has turned into a very public dispute with America’s largest trading partner.
It’s one that could shift production to North America and Central America, where free-trade agreements have boosted the prospects of companies like Unifi, according to Christopher McGinnis, an analyst for Sidoti & Co. U.S. textile-makers sell yarns and fabrics to companies like Nike Inc. and Abercrombie & Fitch Co., who then finish making the items in those regions and export them to the U.S. duty free. More protections against Chinese imports could also boost production in America, McGinnis said.
“If you are looking for a green shoot, this could be an industry that could benefit,” McGinnis said. “They’ve been beat up so much by China.”
Woody, the Trans-Tex CEO, has been on the front lines of competing against China for more than three decades, and in 2016 published “American Dragon,” a book based on those experiences. In the 1980s and 1990s, he was a sales executive at a pen maker, Quill Co., which was undercut by cheaper Chinese imports and later acquired by Newell Rubbermaid.
In 2008, Woody joined Trans-Tex, an 85-person company that goes head-to-head with China. It buys polyester material from a plant in North Carolina and uses it to make items such as branded lanyards for trade shows. It’s survived by turning around small orders fast -- about a third of its orders are shipped in 24 hours -- and pitching better quality and fewer hassles because U.S. customers don’t have to deal with overseas shipments.
But on big orders for 100,000 units, or more, that aren’t needed so quickly, Trans-Tex faces Chinese competitors who often quote prices at a third of what it can, Woody says. Even a 10 percent tariff -- like the one the Trump administration proposed last week -- would help the company consider matching the Chinese more, he said.
“It would make a big difference,” Woody said. “China is the issue.”
While there’s no shortage of doom and gloom coming from corporate America about President Donald Trump’s trade war with China, there is at least one U.S. industry cheering him on: textiles.
After decades of shedding thousands of jobs and closing factories as the U.S. opened up trade with China and other countries, textiles stabilized in recent years. And just as the sector was trying to invigorate growth, along came a presidential candidate pledging to revive American manufacturing.
The industry immediately saw Trump’s election as the best chance in a generation to reorient U.S. trade policy. And so far he hasn’t disappointed. The president withdrew America from negotiations on the Trans-Pacific Partnership (TPP) trade deal in his first week on the job. Now he’s enacted tariffs on $36 billion of Chinese-made goods, including some textiles, and wants to push that to $250 billion.
But the industry wants more. Textiles -- like fabrics and yarns -- are the materials used to make everything from clothing to seat belts. And duties on end, or finished, apparel and other goods from China would help domestic manufacturers compete better on price with Chinese companies and generate more orders for U.S.-made textiles, industry leaders say. Trump, however, largely avoided targeting consumer products for fear of upsetting voters who could face higher prices at the mall.
Crediting Trump
“We’ve got to do something to level the playing field with China,” said Michael Woody, chief executive officer of Trans-Tex LLC, a Cranston, Rhode Island-based maker of lanyards and shoelaces. “I give the president credit for trying to make something happen. For a U.S. manufacturer like my company, we want to see tariffs on end products.”
Placing duties on finished items is anathema to U.S. retailers and consumer brands that rely on Chinese goods, including $28 billion worth of apparel last year, to keep prices low for shoppers. They say levies will only increase price tags, and ultimately cost jobs.
The Trump administration largely avoided hitting consumers in the first round with 25 percent duties -- mostly on machinery -- that went into effect July 6. China matched those with retaliatory levies on goods from soybeans to electric cars, like Teslas.
Just four days later, the president responded with a proposal to put 10 percent levies on $200 billion of imports that included end products like handbags, baseball gloves and air conditioners. Also on the list were dog leashes, a smaller part of Trans-Tex’s business that Woody called “good news.”
And while apparel was spared, Trump has threatened putting tariffs on all Chinese imports, which last year totaled half a trillion dollars. That’s raised alarm bells around corporate America. Rick Helfenbein, president of the American Apparel & Footwear Association with members like Gap Inc. and Macy’s Inc., has started calling the proposed duties a “Trump tax.”
Consumers to Pay
“This will not do anything to help American workers, American consumers, or American businesses,” Helfenbein said in a statement after the $200 billion list was announced. “This will result in inflationary costs throughout the supply chain, ultimately paid for by American consumers.”
The textile and apparel manufacturing industries have little sympathy for companies railing against starting a trade war with China. It points to the U.S. opening up trade with China beginning in 2000 and China’s entrance a year later into the World Trade Organization -- thanks to the backing of then-president Bill Clinton -- as ushering in an era of domestic decline that has cost their sectors almost 800,000 jobs.
“To the retailing and importing community, guess what -- this is what President Trump campaigned on,” said Lloyd Wood, director of public affairs for the National Council of Textile Organizations. “They knew this was coming. If you chose to keep all your eggs in the China basket, that’s a risk you are knowingly taking.”
‘Quite Positive’
Since Trump was a candidate, he’s criticized America’s trade deficit with China, which reached a record $375 billion last year. If he’s serious about reducing it, obvious targets would be textiles and the products made from them. In 1999, the U.S. imported $8.5 billion worth of textiles and apparel from China, and only exported about $176 million there. Shoot forward to last year, when the U.S. imported $45 billion of those products from China, and exported less than $1 billion. That’s a trade gap of about $44 billion just for textiles and apparel.
That’s why Trump’s election generated so much optimism in the industry. In January 2017, shortly after Trump was sworn in, Chief Operating Officer Thomas Caudle of Unifi Inc. -- one of the largest U.S. yarn and fabric producers with about $670 million in annual sales -- said it has the “potential to be quite positive for us.” The president’s decision to pull out of the TPP would also save money for the company, located in the heart of what’s left of the U.S. textile industry in Greensboro, North Carolina. Unifi declined to comment for this story.
Shift West?
Since then, Trump’s saber-rattling has turned into a very public dispute with America’s largest trading partner.
It’s one that could shift production to North America and Central America, where free-trade agreements have boosted the prospects of companies like Unifi, according to Christopher McGinnis, an analyst for Sidoti & Co. U.S. textile-makers sell yarns and fabrics to companies like Nike Inc. and Abercrombie & Fitch Co., who then finish making the items in those regions and export them to the U.S. duty free. More protections against Chinese imports could also boost production in America, McGinnis said.
“If you are looking for a green shoot, this could be an industry that could benefit,” McGinnis said. “They’ve been beat up so much by China.”
Woody, the Trans-Tex CEO, has been on the front lines of competing against China for more than three decades, and in 2016 published “American Dragon,” a book based on those experiences. In the 1980s and 1990s, he was a sales executive at a pen maker, Quill Co., which was undercut by cheaper Chinese imports and later acquired by Newell Rubbermaid.
In 2008, Woody joined Trans-Tex, an 85-person company that goes head-to-head with China. It buys polyester material from a plant in North Carolina and uses it to make items such as branded lanyards for trade shows. It’s survived by turning around small orders fast -- about a third of its orders are shipped in 24 hours -- and pitching better quality and fewer hassles because U.S. customers don’t have to deal with overseas shipments.
But on big orders for 100,000 units, or more, that aren’t needed so quickly, Trans-Tex faces Chinese competitors who often quote prices at a third of what it can, Woody says. Even a 10 percent tariff -- like the one the Trump administration proposed last week -- would help the company consider matching the Chinese more, he said.
“It would make a big difference,” Woody said. “China is the issue.”
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