At the 74th session of the United Nations General Assembly in UN headquarters in New York, the President of the USA Donald Trump emphasized to the world to abandon ‘globalism’ and to adopt a ‘protectionist’ economy to safeguard national interests.
Trump firmly stated, “The future does not belong to globalists; it belongs to patriots.” Strengthening the economic hegemony in the World.
President Trump made clear that his administrations ‘America First’ style diplomacy will be given priority to ensure that US manufacturers rather than outsource, insource to create jobs and for the American citizens. And would not accept a ‘bad deal’ in U.S.-China trade negotiations.
“The US lost 60000 factories and 4.2 million manufacturing jobs since China joined the World Trade Organization. This is also happening to other countries. The WTO needs a drastic change, the second-largest economy in the world should not be permitted to declare itself as a developing country. In order to game the system in others’ expense,” Trump vowed while the Chinese delegates at the UN showed no reaction on camera.
Trump’s continued reference to trade protectionism, threats to raise taxes on American companies that manufacture abroad, and escalating attacks on China all point towards a step back from global trading.
According to a recent study by the American Chamber of Commerce (AmCham), and reported by the Washington Post, many American companies are not happy with the reception they are receiving from the current Chinese administration.
And this cooling of sentiment towards globalization is having an impact in the business world.
The top 5,000 multinational enterprises have been pulling back on direct capital investment and overseas acquisitions in the environment of political uncertainty and dramatically rising protectionist barriers to trade in recent years.
Trump’s rhetoric on anti-globalization confirms his election campaign, tapping into the concerns of the frustrated working class, acknowledging the harm that globalization had done to their communities and America’s standing on the world stage, and promising to do something about it. His slogan – Make America Great Again – alone harps back to a time when America was thriving and dominant in the world.
The predominantly white working class in both Europe and the U.S., unhappy with their current standing, has revealed a growing lack of readiness to tolerate the status quo.
The world appears to be experiencing a globalization backlash with an assault coming from both economic and societal fronts. And with increasing adoption of automation, onshoring will become more and more feasible.
This trade battle will have its strongest implications in the global apparel industry and its supply chain. Simultaneously it will create risk, on the other hand, generating some opportunities to attract new relocation of the business.
Global Trade Alert has found that protectionist measures rose from almost zero in 2008 to over 6,300 trade restricting measures in 2016.
According to a report released by the Reshoring Initiative in the US, the bleeding of manufacturing jobs to other countries has stopped, with the U.S. seeing a total of 249,000 manufacturing jobs returning home from offshore between 2010 and 2015.
Manufacturers are now able to generate the same workflow without being labor-intensive. As Richard Yetsenga, ANZ Chief Economist points out, these days, due to the rise in automation, it takes just five workers to create US$1 million worth of output in contrast to the 25 workers needed back in 1980.
Impact on the global apparel industry
Especially in the world of fashion where consumer taste and trend change rapidly, enabling manufacturing to happen closer to the end market will allow brands and producers to react in a more agile fashion to these changing dynamics.
The appeal of cheap labor in developing countries is not the draw it once was. With advancements in automation and digitization, the advantage of low-wages has been undermined as companies are now able to manufacture products at home with a minimal workforce.
Four days after deputy U.S. and Chinese negotiators held inconclusive talks in Washington, Trump’s remarks were anything but conciliatory and stressed the need to correct structural economic manipulations at the heart of the countries’ nearly 15-month trade war.
“For years these abuses were tolerated, ignored, or even encouraged. As far as America is concerned, those days are over,” highlighting a harsh reproach to China’s trade practices.
“Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale,” Trump said.
According to the Center for Economics and Business Research, China is expected to take over the US as the world’s largest economy. This trade battle will have its strongest implications in the global apparel industry and its supply chain. Simultaneously it will create risk, on the other hand, generating some opportunities to attract new relocation of the business.
Over the past year, the US and China have imposed tariffs on one another’s goods worth billions of dollars. And the global apparel sector is battered by strong turbulence as an aftermath of this trade war.
China is the largest source of apparel products for the USA as it supplies more than 33% of the US’s total apparel imports. China’s apparel export to the USA has declined by 10.39% during 2015-2018; in financial value, the decline is 3.17 billion dollars.
Although Trump hinted hope that the United States and China could still reach a trade deal, he made clear he wanted a deal that would rebalance the relationship between the two economic superpowers.
“The American people are absolutely committed to restoring balance in our relationship with China. Hopefully, we can reach an agreement that will be beneficial for both countries,” Trump said.
“As I have made very clear, I will not accept a bad deal,” he declared.
Trump also recently said he was not interested in a ‘partial deal’ to ease tensions with China, saying that he would hold out for a ‘complete deal.’
While this trend of ‘reshoring’ will not necessarily fulfill Trump’s promise of bringing many manufacturing jobs back to America, it will enable American companies to run their factories on home soil, removing their reliance on labor-intensive factories in developing nations.