Trump strikes, China counterattacks: A shock for the fashion and retail industry

Trade tensions between the United States and China are escalating as Beijing announces retaliatory measures in response to President Donald Trump’s decision to impose 10% tariffs on Chinese imports. The new Chinese countermeasures, which include tariffs on the energy, auto and technology sectors, as well as export restrictions on critical minerals, signal an escalation of the trade war that could have major consequences for global trade, particularly in the fashion and retail sectors.

China’s response: economic countermeasures

On February 10, China’s Ministry of Finance announced a new round of tariffs targeting U.S. imports. The measures include a 15% tariff on certain types of coal and liquefied natural gas. In addition, a 10% tariff is being imposed on crude oil, agricultural machinery, large-displacement cars, and pickup trucks. These measures are intended to put economic pressure on key U.S. industries. In addition, China has imposed export controls on more than 20 metal products and related technologies, including tungsten and tellurium, two critical minerals used in industrial and defense applications. As the world’s largest producer of tungsten, China could affect global supply.

American addiction brought to light

Moreover, these retaliatory measures starkly illustrate the United States’ dependence on China, observe Josh Lipsky, senior director of the Atlantic Council GeoEconomics Center and a former adviser to the International Monetary Fund, and Mrugank Bhusari, deputy director of the same center. By imposing tariffs on American products—from coal to liquefied natural gas to crude oil—and restricting the export of strategic minerals such as tungsten and tellurium, Beijing is exposing the vulnerability of key sectors of the American economy.

The listing of major companies like biotech leader Illumina and PVH Group, parent company of Calvin Klein and Tommy Hilfiger, reinforces this reality: even major players are getting caught up in China’s trade policies. This reality calls into question the long-term economic sovereignty of Uncle Sam, who is inevitably tied to China for the supply of essential resources and technologies.

Fashion retailers caught in the turmoil

The fashion industry, which relies heavily on global supply chains, has been hit particularly hard by this trade conflict. The new U.S. tariffs add to the already high costs for brands that source and manufacture their products in China. For its part, China’s targeting of PVH Group is sending a strong message that the fashion industry will not be immune to geopolitical tensions. Industry experts predict that these trade policies will lead to higher production costs for U.S. retailers, which could translate into higher prices for consumers. Faced with this situation, many fashion brands are evaluating their options.

Some companies are considering moving production to other markets, such as Vietnam, India or Bangladesh, to mitigate the impact of tariffs. Others are choosing to absorb these costs by reducing their profit margins, although this is a risky choice in a context where inflation is already weighing on consumption. Another strategy is to use “tariff engineering”, a technique that allows the structure of products and supply chains to be modified in order to benefit from more advantageous tariff categories.

A volatile business landscape and an uncertain future

While Trump’s tariffs are currently at 10%, they are still well below the 60% he had threatened, raising the possibility of escalation. The tariffs in place under the Biden administration were already a significant challenge, and the new measures could push some import duties beyond 45% when combined with previous tariffs. China has also said it intends to challenge the tariffs at the World Trade Organization (WTO), saying the U.S. actions are undermining the stability of global trade. With the possibility of protracted negotiations or further economic retaliation, retailers and fashion brands remain in a precarious position.

The industry faces a complex web of regulatory, economic and geopolitical risks that could take years to unravel. As trade barriers multiply, fashion companies will need to rethink their sourcing strategies, build resilience in their supply chains and adjust pricing to adapt to this uncertain environment. The question remains: will this conflict result in a new trade deal or a protracted economic war? One thing is for sure: the fashion and retail sector is on the front lines of this economic battle.

This article originally appeared on FashionUnited.FR, translated and edited to English.