Everyone is in a state of shock at the trade war that has broken out after the US introduced new tariffs to penalise countries that export more goods and services to the US than they import from the US. It’s been a week of chaos in the markets and deep uncertainty about how the globalised, complex fashion system will respond.
Lets unpack the basics.
What are tariffs?
Tariffs are taxes charged on goods bought from other countries. For example, a 25% tariff on a R10 product would mean an additional R2.50 charge.
South Africa has a 45% tariff on imported clothing: this means that a R40 tax will be added to a R100 T-shirt imported from China.
Why are these tariffs charged?
There are a number of reasons:
- To encourage people to buy local goods which should:
o push a country to make its own products rather than import
o protect local businesses - To raise revenue (and replace income tax revenue with income from tariffs)
- To regulate trade
Where?
Today (9 April) new USA tariffs have taken effect across the world. Countries like Cambodia, Bangladesh, Vietnam and Lesotho that produce clothing largely for the US market to grow their economies have been hit the hardest. These are the new tariffs for some clothing producing countries:
China = 104%
Lesotho = 50%
Cambodia = 49%
Vietnam = 46 %
Bangladesh = 37%
South Africa = 30%
Why has Lesotho been hit so hard?
Good question. Although his family dynasty has produced T-shirts there, the president of the US called Lesotho a nation that “nobody has ever heard of” in March.
Lesotho produces for Levi’s, Calvin Klein and Walmart, and exports about 75% of its output to the United States. Nearly half of Lesotho’s 2.3 million population lives below the poverty line. This tariff is “not based on facts on the ground,” according to Lesotho’s trade minister, Mokhethi Shelile.
What now?
US citizens will pay far more for their clothes (98% of their clothes are imported).
Factories in the east will absorb and offset the costs, which most probably means garment workers will earn less than they already do.
A trade war has broken out: some countries are now increasing tariffs on US goods. Costs of goods are expected to go up. Investors are panicking. The stock markets have nosedived.
What do the experts say?
Most are horrified:
- Prices will go up, garment worker jobs are at risk, salaries for garment workers will be reduced, poverty will rise, and consumers may expect availability issues
- Tariffs are imposed indiscriminately, without regard for how strategic the good is to the US or whether it can even be made domestically
- “This isn’t a tax on countries – it is a tax on American companies and American consumers.” – Andrew Rosen, an investor and adviser to independent American brands
Other views
Fashion magazine GQ: “These tariffs make no sense in economic terms, but anything that helps us be more intentional about what we buy and more thoughtful about the real cost of our clothes to the planet and our fellow humans can’t be a totally bad thing.”
Fashion activist organisation ThredUp: The tariff policy is a “significant win for both the environment and the future of sustainable fashion.” It argues that the US market has been flooded with fast fashion: low-cost, short-lived items.
What should we do?
Ensure the costs are NOT passed on to the most vulnerable people in the value chain. Brands and retailers have profit margins and can absorb some of the costs.
The Southern African Development Community should negotiate a free trade agreement with China, India and others.
What does this mean for fashion in South Africa?
We are deeply worried in particular about jobs and the impact the new tariffs will have on an economy already battling with 41.6% unemployment and an economic growth rate averaging 1%.
These tariffs are “very bad” for South Africa, which exported about R153 billion to the US in 2024, making the US South Africa’s second-largest export destination.
Credit
- Main image Vida Huang via Unsplash
- Read more of our Explainers here
