While incoming US president Donald Trump has created headlines around the world by threatening 60% trade tariffs on imported Chinese goods, they won’t be anywhere near enough to make many commodity textiles competitive if they are made in the USA.

In a recent Linkedin post, Charlie Merrow, CEO of the technical soft goods manufacturer Merrow Group, headquartered in Fall River, Massachusetts, proposes from his calculations that a huge 470% tariff rate would be needed to actually level the playing field.

“For basic t-shirts imported from China, which have a current tariff rate of 24%, a new total tariff would need to climb by an additional 446% to fully neutralise the labour cost disparity between American and Chinese production,” he writes. “As we navigate the complexities of global trade, it’s worth examining some critical factors impacting industries like apparel manufacturing. The average labour cost for stitchers is $3.50 per hour in China, while that in the USA is $20 per hour.”

Merrow provides the example of a Chinese-made Walmart t-shirt with a manufacturer’s suggested retail price (MRSP) of $10.98, that is purchased for $3.62 by the retailer.

Walmart would have to be prepared to pay $16 for an identical US-made t-shirt, in addition to its freight costs, and retail it for $49.14 in its stores to make the same profit.

“A t-shirt purchased for $16 and sold for $49 would allow for a robust manufacturing ecosystem in the USA to be developed,” Merrow says. “Tarrifs in the 50-200% range don’t come close to creating cost parity with existing manufacturing infrastructure and will likely not impact substantial manufacturing expansion in the Americas.

“Tariff hikes at a much higher level could make US-made goods competitive on labour/cost grounds but would have major implications for pricing, supply chains and consumers. The conversation, however, shouldn’t just be about tariffs, but about leveraging innovation, automation and sustainability to bring balance to global trade. US State and Federal ‘America First’ purchasing programmes would have a more significant impact on domestic manufacturing than tarrifs, unless the tarrifs were global and on the order of 300-500% for soft goods. This underscores the complex trade-offs between cost competitiveness and the broader economic and ethical implications of reshoring manufacturing.”

www.merrow.com