Just one day ahead of the tariff deadline, the Trump administration announced an updated list of tariff rates for countries round the globe.
For many of the major apparel producing countries, the new rates represent an improvement over those first announced in April. For instance, Bangladesh now stands at 20 percent, down from 37 percent. Pakistan is at 19 percent from 29 percent. And the rate for Vietnam is now 20 percent, down from the threatened 46 percent. Cambodia, Indonesia, Malaysia and Thailand are all set at 19 percent, reduced from anywhere from the 24 percent to 49 percent stated on Liberation Day.
One notable exception is India. The country, which had hoped for a tariff rate that would give it an edge over its direct competitors, landed at 25 percent, essentially the same as the original 26 percent that was initially announced.
Additionally, the U.S. announced a 35 percent tariff on goods from Canada over fentanyl concerns, though goods that fall under USMCA are except. Negotiations with Mexico are ongoing, during a 90-day pause. All other countries not listed are subject to a 10 percent tariff rate, unless covered by a separate agreement. See the full list of tariff rates in Trump’s executive order here.
These new tariff rates go into effect for goods entering the U.S. as of August 8 at 12:01 am EDT. For any products in transit to their final destination to the U.S., the effective date is October 5 at 12:01 am EDT.
In addition to the stated tariffs, the executive order also stipulated that transshipped goods would face a 40 percent penalty. However, the administration has yet to provide details on what this entails and how they will be enforced.
The Impact
While the rates brought relief for some nations, others are fearful of how their countries will fair.
For India, which exports a third of its apparel to the U.S. market, the 25 percent tariff rate puts it at a disadvantage comapred to its competitors, chiefly, Vietnam and Bangladesh.
Analyst Akshat Garg, AVP of financial firm Choice Wealth, summed up the situation in the Economic Times, saying, “For Indian exporters in gems, textiles, and auto parts, the impact is immediate and harsh: sectors already operating on slim margins now face a 7-10% cost disadvantage compared to rivals like Vietnam.”
The market responded accordingly to the news. Overall, India’s apparel sector slumped by 7 percent with companies like Kitex Garments, which earns 70 percent of its revenue from the U.S., dropping by 5 percent, according to the publication.
Sudhir Sekhri, chairman of the Apparel Export Promotion Council (AEPC), warned that without intervention, the Indian apparel industry could face “mass layoffs.”
On the other side of the coin, Bangladesh is welcoming a rate that keeps the country on par with other apparel producing nations.
In BSS News, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Mahmud Hasan Khan Babu called the 20 percent tariff a “a big relief“.
Mohiuddin Rubel, additional managing director of Denim Expert Ltd and former BGMEA director, told The Financial Express he hopes the relatively lower rate will “encourage buyers to shift sourcing away from China.”
Faisal Samad, director of BGMEA said despite the parity with its competitors, the tariffs still represent “significant” cost pressure on the industry.
“The real work begins now,” he told the news outlet. “We now need to renegotiate terms with buyers and chart a long-term roadmap for cost management, opportunity mapping, and market expansion.”
For Pakistan, a trade deal came after negotiations over the country’s oil reserves. The resulting agreement represents “a new era of economic collaboration,” according to the Pakistan finance ministry.
Thailand’s response to its 19 percent tariff was echoed throughout the region, with many southeast Asian nations at least happy to be on a level playing field with each other.
“It helps maintain Thailand’s competitiveness on the global stage, boosts investor confidence, and opens the door to economic growth, increased income, and new opportunities for the country.” Thailand’s Finance Minister Pichai Chunhavajira said on Facebook, adding the country would provide “support measures” like loans, subsidies and tax measures for small and medium sized companies struggling with under the duties.
While the ongoing trade war has created turmoil for the rest of the world, if the U.S. trade action was intended to penalize China, it may already be having the desired effect.
A recent item in The Guardian highlights how business has slowed in Guangzhou since April, leaving suppliers there with financial burdens.
“If the tariffs go up, we need to lower the production costs to combat it,” said factory owner Yang Ruiping. “It leaves little room for profit.” The factory, located in Panyu near Guangzhou, reportedly loses money on every order.
It’s no wonder another apparel executive in the region called the U.S. market “volatile and risky.”
