Six years after their imposition, the Section 301 tariffs under the US Trade Act of 1974 continue to significantly impact Chinese imports, especially in the textiles and apparel sectors. Initially implemented in 2018, these tariffs targeted 5,745 products, with rates increasing to 25 percent and an additional 10 percent tariff. The tariffs were aimed at addressing intellectual property theft and other unfair trade practices, as outlined by the US.

In addition to the strain on the Chinese textile and apparel industries through these tariffs, the world has witnessed a shift in global textile supply chains, with US GSP textile beneficiaries and alternative sourcing destinations stepping in to fill the void.

A 15 percent tariff was applied to imports of apparel, on top of the WTO’s Most Favored Nation (MFN) tariffs, which in 2018 averaged 14.4 percent for knitted apparel (HS Chapter 61) and 10.4 percent for woven apparel (HS Chapter 62). These tariffs were compounded by additional duties and anti-dumping measures aimed at specific Chinese companies and apparel products.

This evolving scenario prompted discussions on which countries were poised to benefit from China’s declining apparel exports to the US. While several contenders were expected, Pakistan emerged as one of the potential South Asian players that could benefit.

Trade war’s toll on China’s textile exports to the US

Later in 2019, the US enacted the Uyghur Forced Labor Prevention Act (UFLPA) to counter alleged forced labor practices in China. Combined with tariffs and legislative measures, Chinese exports to the US have suffered significant losses: USD 5.4 billion in knitted garments (Figure 1a), USD 5.6 billion in woven garments (Figure 1b), and USD 425 million in home textiles (Figure 1c). Despite extremely high tariffs, China continued to export its low-cost articles, such as blankets, bed linen, toilet linen, kitchen linen, and other made-up articles under the home textiles category, with a noticeable shift towards tariff lines with comparatively lower duties.

‘China plus one’

Simultaneously, China’s manufacturing landscape underwent a significant transformation, driven by rising wages, stricter environmental regulations, and the adoption of digital technologies. Many Chinese companies began relocating operations to overseas destinations or shifting production to China’s western inland regions as part of the “China plus one” strategy, aimed at diversifying supply chains and reducing dependence on China.

This shift spurred discussions about alternative manufacturing hubs for labor-intensive Chinese textile businesses, with Pakistan emerging as a potential candidate. However, the relocation of Chinese manufacturing to Pakistan was impeded by security concerns, a challenge that still remains unresolved.

One country’s loss is another country’s gain

Trade wars inevitably create distortions for some players while offering opportunities to others. For countries in South Asia, the US-China........

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