How Will President Trump Affect the Apparel Supply Chain?

Published
November 2016

Donald J. Trump's upset victory in the U.S. Presidential Election left many in a state of rattled uncertainty and apprehension. Regardless of your feelings on his political and social stances, Trump ran on a platform of economic change that has the potential to significantly affect many different industries and international business dealings.

On a base level, retailers shouldn't expect to see a disruption of growth during the coming holiday season. While some expressed anxiety over the bitter campaign months dampening spending habits, the National Retail Federation has forecasted a 3.6 percent jump in sales, which would mark the largest hike in years. We should not expect politics to trump (no pun intended) the positive influence of wage gains and consumer confidence.

The true impact of this switch in leadership and policy direction will more likely manifest over time, as proposed legislation begins to unfold.

The foremost item would be a cessation of the nation's participation in the Trans-Pacific Partnership (TPP). Promising to withdraw from this 12-nation trade agreement was a consistent staple throughout Trump's campaign and, sure enough, the president-elect pointed to it as a "day one" priority in a video outlining his initial policy plans

Whereas the TPP was crafted around the idea of lowering tariffs and taxes to encourage international trade, Trump appears fixated on moving the opposite direction with his nationalist agenda.

Many of his other proposals stem from this underlying mentality. He has repeatedly stated his desire to renegotiate the North American Free Trade Agreement (NAFTA), while suggesting a 20 percent tax on imported goods as well as new hefty tariffs with Mexico and China.

Many countries specializing in textile exports, in particular, could feel the hurt from these isolating ideologies. For instance, Vietnam – a country that can point to America as the source of nearly 50 percent of its textile and garment export turnover – is anticipating the lowest growth rate in a decade next year. In Pakistan, where the textile sector is already experiencing decline, officials have warned that if President Trump were to terminate major trade pacts, it "will result in chaos and this may hit Pakistan's textile exports." Other parts of the region are surely weighing similar concerns.

However, it is important to keep a few different things in mind.

First of all, we have already seen several indications that Trump the candidate was not necessarily an exact prototype for what we can expect from Trump the president. In the weeks since his victory, he has already softened publicly on several firmly entrenched campaign positions. While some of his protectionist stances may seem toxic to international trade in their most extreme forms, those probably aren't the versions of policies and regulations we should actually expect to see.

Secondly, he's a highly successful businessman. This paved the way for his successful run to the White House. Trump's ventures have utilized foreign labor frequently so he clearly recognizes the advantages. It is possible to strengthen domestic manufacturing health while maintaining robust trade pipelines to various nations in industries where it makes sense, such as textiles and garments.

So we shouldn't overreact when encountering stark and provocative quotes about nixing the TPP or dismantling NAFTA. In reality, the alterations to such conventions will likely be more minor and gradual than his typically hyperbolic rallying cries leading up to Election Day would indicate. While he may want to bring more jobs home, Trump also understands that consumers want good prices, and that sourcing certain products and labor can be elemental to keeping America's economy running smoothly.

There might ultimately be universal benefits to some of his proposed tweaks. The TPP, for example, has been panned by many people from all sides. Even those who support its core purpose are known take issue with its terms and transparency. Trump believes he can do better, so now he'll get his chance to do so by pursuing bilateral trade deals.

His lack of political experience and his temperament have bred plenty of doubters. Given his rhetoric, a level of wariness is understandable for many stakeholders within the garment industry and beyond.

But then again, Trump has proven to be a man who is full of surprises.