Opinionated Styles: Thinking about tariffs

A short case study -- American clothing manufacturers

If you are trying to get your head around the why of the Tariffs – look no further than the American Clothing manufacturing industry. It employed 900k in 1990 and now employs less than 100k. 97% of US purchased clothing is imported. One major reason for the figure not being higher is the US military only purchases American. I sincerely doubt that the US military will stop buying American but they may curtail some of their purchases. It would seem that the US military currently buys 0.5% of all clothing purchased in the US.

The real threat to the remaining American clothing manufacturers are things like the de minimis loophole which has been exploited by certain Chinese companies to bypass the existing tariffs and deliver direct to the American consumer. The Trump Administration closes this loophole on 2 May 2025 as adequate systems are now apparently in place to ensure enforcement. China and Hong Kong are the first countries affected with others to come on stream in due course (no doubt).

78% of Americans when asked would prefer to buy American made clothing – the reasons they don’t are cost and availability. It can be hard to find American made products (hint it is going to be the imported products which will be increasing in price).

It is fairly easy to discover Skims – the Kim Kardashian lingerie brand has 100% of its offerings manufactured abroad. I would imagine their prices are going to go up. A Made in America equivalent can be found but they are much smaller – Only Hearts or Between the Sheets. I have not checked out the price differential but I suspect their prices will stay the same and thus Only Hearts or Between the Sheets should become more affordable in relation to Skims. However, will places stock these brands given the huge PR footprint of Skims?

Equally materials like Lycra or Spandex, even though invented in the US are mostly produced abroad. China accounts for 75% of current Spandex manufacturing. You want shapewear or leggings, they will probably be manufactured using Chinese Spandex.

Labour costs are part of the story. Wages are very low in these countries and lip service is paid to labour laws in the consuming countries. It is why you do get investigative reports about the terrible conditions in those factories, but ultimately the consumer seems to care more about the price. (This is a problem for UK base manufacturers as well – the UK lost most of its clothing manufacturing when Marks & Spencer decided to offshore production in the early 1990s)

A large segment of the American population is addicted to fast (and cheap) fashion. The fashion industry is a huge polluter (much of what is recycled is actually tossed away). Making clothing more expensive may alter lifestyles to a certain extent, but does the purchase of fast fashion actually mean a higher standard of living for the American consumer or indeed any consumer? Or is it merely fear of missing out which drives the consumer? Most countries, particularly those countries which are producing the clothing are not consuming at the same rate as America.

Will the tariffs work? Who knows.

It depends on if the American consumer is willing to follow the US military and buy American. 78% of Americans are willing, if the price is right and they can find the product. The trouble might be getting hold of more of the product given the low manufacturing base. It takes a long time to build a factory (the upside is any new factory should have the latest specifications and thus should be more future proof — one reason for the UK’s decline was that its factories were aging after WW2 as opposed to say W Germany’s which were totally rebuilt). Any new factory is likely to be heavily mechanised and thus the number of good quality manufacturing jobs might be limited.

But can the US afford to be more than 97% dependant on other countries for its clothing? Clothing is a basic need.

America became great through its manufacturing prowess, not through its consumption of others’ products. In fact part of the reason why the American Revolution was fought was to ensure the US could develop its own industries. For example, Britain required certain things like hats, glass, paint, lead and tea (!) was imported via British channels rather than allowing the colonies to develop their own. It was really the Great Exhibition of 1850 which showcased American talent – it was the head to head tests of the products. American companies may have taken less than their allocated space, but their products (like locks, ploughs etc) were superior.

Yes American corporations still control most of the global trade, but the manufacturing is done elsewhere, and increasingly Chinese companies are coming to dominate. Outsourcing and offshoring has benefited a few, but not the majority of the working class.

There are two types of equilibrium for currencies – the trade and the Triffin. They have been out of whack for awhile (the USD is the World’s reserve currency and thus the overly strong dollar has played havoc with US manufacturing – I can remember concerns from the mid 80s – the whole thing about John Deere tractors not being able to compete globally) The actual Triffin tipping point might be closer than convention suggests because perhaps one should be looking at the manufacturing output rather than the over all GDP (the US still dominates in terms of services…)

There are many reasons why the US wants to maintain the dominance of the US dollar (aka being the universal reserve currency) including for serious national security reasons, but this becomes harder and harder once the Triffin tipping point is reached.

Basically, the US can not continue to be the ultimate consumer while its manufacturing base erodes and expect to maintain its dominance as the reserve currency in the longer term. One only needs to look at Britain to see what happens. The jury remains out about re-industrialization of the clothing manufacturers.

Trump has rolled his dice. He is attempting to preserve the US dollar’s status as the reserve currency while giving some relief to manufacturing and hopefully reshoring much more of its industry including the clothing manufacturing.

This provides more info on the state of the America clothing manufacturing industry. https://allamerican.org/research/clothing-manufacturing-report/

This explains about Triffin’s hypothesis and what Trump might be attempting to do: https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf

All I know is that currently we are in uncharted territory. The world is changing far quicker than I (or indeed the financial markets who seemed to have bet he would not do this) would like.