All week global markets have been reacting to US President Donald Trump’s pledged tariffs on 1 February. WTiN has spoken to key market figures to gather insight on how this will affect trade relations and economies.
Global markets have been reacting to the new trade law territory US President Donald Trump invoked on Saturday (1 February) after he signed an executive order to go ahead with his pledged tariffs on Canada, Mexico and China.
President Trump pushed ahead with an emergency sanctions law to justify 25% tariffs on Canadian and Mexican imports and an extra 10% duty on Chinese goods to tackle fentanyl and illegal immigration into the US.
The 1977 International Emergency Economic Powers Act (IEEPA) is untested for imposing import tariffs and the US President was warned all three nations could take retaliatory countermeasures.
China’s response
Moments after the news broke China announced an anti-trust investigation into Google. The country’s finance ministry also announced 15% tariffs on coal and liquefied natural gas, and 10% on crude oil, farm equipment, large-displacement vehicles and pickup trucks from the US.
Since then, China’s commerce ministry and its customs administration said on Tuesday (4 February) it would impose export controls on a raft of critical materials to “safeguard national security interest”. The administration added it was including US companies PVH Group and Illumina Inc to its unreliable entity list. Clothing company PVH owns brands including Tommy Hilfiger and Calvin Klein.
China’s finance ministry said in a statement: “The unilateral imposition of tariffs by the US seriously violates the rules of the World Trade Organisation. It is not only unhelpful in solving its own problems but also damages the normal economic and trade cooperation between China and the US.”
It has been reported that China is now filing a lawsuit with the World Trading Organisation against Trump’s tariffs.
Devin Steele, secretary/treasurer of Southern Textile Association, said: “A 10% tariff on Chinese imports, effective 4 February, targets a major source of textiles and apparel for the US market. Is it enough? Probably not. China has been the biggest disrupter of the global textile market, and a higher tariff would help combat its unfair trade practices, including forced labour and state subsidies. Beyond tariffs, the US government should remain vigilant to eliminate the de minimis tariff waiver, enhance customs enforcement, penalize repeat trade violators and closing trade loopholes that benefit China.
“If the ‘China problem’ can be curbed, the long-discussed but slow-to-materialize trends of reshoring and nearshoring could finally gain traction, creating new opportunities for US textile manufacturing and supply chains.”
Mexico and Canada developments
Yet, also on Tuesday (4 February) the US President avoided the brink of economic conflict with Mexico and Canada, delaying the duties for another month, following 11th-hour talks.
President and CEO Kim Glas of the National Council of Textile Organizations (NCTO), representing the full spectrum of US textiles, said: “We are grateful that President Trump has reached an agreement with both Mexico and Canada to pause the planned 25% penalty tariffs on their imports for one month while all parties continue to negotiate a deal to address his administration’s serious concerns.[...] Mexico is the US textile industry’s largest export market for American fibres, yarns and fabrics, while Canada ranks as the third largest market for these US textiles. These countries serve as partners in the vital North American textile and apparel coproduction chain, helping to support 500,000 US textile jobs nationwide.”
Glas added: “We encourage President Trump to aggressively confront China’s predatory trade practices to ensure a strong American manufacturing base.”
The BBC reported Mexico vowed to retaliate, with President Claudia Sheinbaum posting on social media: "I've instructed my economy minister to implement the plan B we've been working on, which includes tariff and non-tariff measures in defence of Mexico's interests."
IEEPA gives the president powers to impose economic and financial sanctions in times of crisis. It is the quickest way for the President to impose tariffs.
The American Apparel & Footwear Association (AAFA) responded to the tariffs. Steve Lamar, president and CEO said: “Widespread tariff actions on Mexico, Canada, and China announced this evening (1 February) will inject massive costs into our inflation-weary economy while exposing us to a damaging tit-for-tat tariff war that will harm key export markets that US farmers and manufacturer's needs. We should be forging deeper collaboration with our free trade agreement partners, not taking actions that call into question the very foundation of that partnership.”
"During this time of high inflation, this is not the time to impose new costs on US supply chains. Instead, our industry needs tariff relief and commitment to smart trade policy and strong trade partnerships," added Nate Herman, AAFA senior vice president of policy. “We need to renew expiring and expired trade preference programs with our allies and strengthen the competitiveness of our free trade agreement with Central America to stem the tide of migration."
In Mexico, apparel (knitted and non-knitted), home textiles and footwear, which collectively account for roughly 85% of Mexico’s total textile related exports to the US, will be impacted by the 25% tariff.
While as a USMCA member, Canada has firm trade relationship with clothing dominating exports. Non-knitted apparel accounts for $617.45m and knitted at $403.79m, contributing 24.90% of total exports.
Looking ahead
Steele commented: “With at least 26 US textile plants having closed their doors in the last two years, the industry is experiencing a tumultuous time – rivalling at times, perhaps the late 1990s and early 2000s, when the industry was losing plants by the hundreds and employees by the hundreds of thousands as brands and retails began ‘chasing the needle’ to Asia. The industry survived as a whole through innovation, collaboration and high-tech modernisation.”
Moving forward President Trump added that tariffs will “definitely happen with the European Union”, saying the has been “taken advantage of” having over $300bn deficit.
He said: "They don't take our cars, they don't take our farm products. They take almost nothing, and we take everything from the millions of cars, tremendous amounts of food and farm products. So, the UK is way out of line, and we'll see the UK, but European Union is really out of line.
"UK is out of line. But I'm sure that one, I think that one, can be worked out, Prime Minister Starmer has been very nice. We've had a couple of meetings, we've had numerous phone calls, we're getting along very well, and we'll see whether or not we can balance out our budget with the European Union.”
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