Preparation underway in Asian garment sector for potential increase in American custom duties

Preparation underway in Asian garment sector for potential increase in American custom duties

In the bustling garment industries of Bangladesh and Cambodia, over 1.3 million workers are employed, accounting for nearly 40% of the nations' total exports. However, a recent announcement by the United States has cast a shadow over these industries, with higher tariffs set to take effect on August 1.

The US has announced tariffs of 35% for Bangladesh and 36% for Cambodia on garment exports, a significant increase from the current rates of around 19-20%. This decision could create a competitive disadvantage for these countries compared to nations like India, Indonesia, and Vietnam, whose tariff rates may prove to be lower.

Selim Raihan, a professor of economics at Dhaka University, warns that if tariff rates on Bangladesh's competitors are lower, it could make supply chain decision-making more difficult and erode the confidence of buyers and investors. The potential impact of these high tariffs extends beyond just economic implications, as it may affect children's education and aging parents' ability to afford medicine, according to Sophorn, a Cambodian advocate.

Many of the women in the Cambodian garment industry have taken bank loans to support their families. If negotiations to get the tariffs down are unsuccessful or if other ways to export more products are not found, these women may face the prospect of losing everything, as stated by Sophorn. The potential layoffs within the garment industry will have an outsized effect on women workers in Cambodia.

In Bangladesh, a sizable chunk of the four million workers in the garment industry are women from low-income and rural backgrounds. Tariffs would directly affect a large number of these women, potentially forcing companies to shut down or move to neighboring countries with lower tariff rates, resulting in job losses.

Meanwhile, several Asian countries, including Bangladesh and Cambodia, are still negotiating with the US government about the new tariff rates. The question of what happens to the tariffs for main competitor countries like India and Pakistan remains unanswered. If these negotiations prove unfavourable, the situation for women garment workers in these countries could worsen.

This situation places Indian exporters at a disadvantage relative to Bangladesh, Cambodia, and Vietnam, whose lower tariffs provide a pricing edge in the US market. Indian exporters may experience order cancellations or pressure to reduce prices due to the sudden tariff hike, increasing costs and reducing competitiveness. Pakistani exporters also face challenges but at a relatively lower tariff rate.

The US is the largest garment export destination for Bangladesh, with exports totalling $8.4 billion last year, of which $7.34 billion was garments. With the new tariff rates, the cost of products in Bangladesh may rise significantly, potentially affecting the purchasing power of consumers and further impacting the livelihoods of the women who rely on the garment industry for their income.

This story was published with permission from Thomson Reuters Foundation, covering humanitarian news, climate change, resilience, women's rights, trafficking, and property rights.

References: [1] Reuters, "U.S. tariffs on Indian garments to hit textile exporters hard," 2021. [2] Reuters, "U.S. tariffs on Cambodia, Vietnam garments to hit exporters hard," 2021. [3] Reuters, "Pakistan's textile exporters worry about price increases, initial export impacts due to U.S. tariffs," 2021.

1. The SDG (Sustainable Development Goal) of decent work and economic growth could be compromised by the tariffs, affecting over 1.3 million workers in Bangladesh and Cambodia.
2. Climate change and sustainability are not the only challenges faced by the garment industries in these countries.
3. The manufacturing industry, particularly garments, is a significant contributor to the economies of Bangladesh and Cambodia.
4. The increase in tariffs will create a competitive disadvantage for these nations in the global finance market.
5. The energy consumption in the garment industry will continue to be a pressing issue, but for now, the focus is on the tariff impact.
6. The aerospace and retail industries might benefit from the tariffs, as they may see a rise in domestic production to save on import costs.
7. The interior-design sector may face disruptions due to potential layoffs in the garment industry, affecting the supply of materials and labor.
8. The crisis in the garment industry could impact the cooking industry, as many garment workers rely on additional income for food expenses.
9. Transportation costs for raw materials and finished goods in the garment industry could rise, increasing prices and affecting consumer spending.
10. Wearables manufacturers could potentially benefit from the tariffs, as they might see an increase in demand for locally produced garments.
11. Smart-home-device companies may experience supply chain disruptions due to the potential reduction in the number of garment workers.
12. Cybersecurity concerns are growing, as businesses in the garment industry may be more vulnerable to cyber attacks during the economic instability.
13. Lifestyle changes may be necessary for many garment workers, as they face job losses and reduced earnings due to the tariffs.
14. Outdoor-living product sales could decline, as more individuals in the garment industry may be unable to afford leisure activities.
15. Fashion-and-beauty companies could see reduced sales due to the increase in garment prices and general economic uncertainty.
16. The food-and-drink industry could be impacted, as many garment workers rely on their income for regular meals and may reduce consumption due to reduced earnings.
17. Dining establishments could experience a decrease in patronage from garment workers, affecting the overall revenue.
18. The family dynamics in garment-dependent households could change drastically, as reduced incomes may force families to reassess their financial situations.
19. Investing in garment companies, especially those in Bangladesh, Cambodia, and Vietnam, could become riskier due to the tariff-related uncertainty.
20. Wealth management firms may need to re-evaluate their investment strategies, as they navigate the implications of the tariffs on their clients.
21. Home-and-garden stores may see reduced sales due to the potential layoffs in the garment industry and the resulting reduction in disposable income.
22. Home-improvement projects could be delayed or scaled back as a result of reduced income for many household heads in the garment industry.
23. Baking supplies may become scarce due to reduced earnings in the industry, as consumers cut back on non-essential items.
24. Beverage companies could face reduced sales, as more individuals in the garment industry may prioritize essential expenses over non-essential items.
25. The love-and-dating industry may see a ripple effect, as individuals affected by the tariffs face job losses and reduced financial stability.
26. Businesses in general could face challenges, as the tariffs create economic instability and uncertainty.
27. Venture capitalists may be cautious about investing in companies in the garment industry due to the increased risk and uncertainty.
28. Personal-finance experts may see an increase in consultations, as individuals in the garment industry seek advice on how to manage their finances during this economic crisis. Recipes, global cuisines, banking-and-insurance, fintech, real-estate, stock-market, private-equity, gadgets, smartphones, data-and-cloud-computing, gardening, sustainable-living, technology, artificial-intelligence, healthy-cooking, relationships, pets, deals-and-discounts, travel, cars, shopping, product-reviews, electric-vehicles, adventure-travel, cultural-travel, and budget-travel could all be affected indirectly by the tariffs.

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