US fashion companies are reducing their China exposure and focusing more on emerging destinations in Asia and the Western Hemisphere, according to the latest edition of the USFIA's Annual Fashion Industry Benchmarking Study.
- About 43% of this year’s survey respondents sourced less than 10% of their apparel products from China, compared to only 18% in 2018. Also, nearly 60% of respondents no longer use China as their top apparel supplier in 2024, much higher than the 25–30% range before the pandemic.
- This year, more companies reported sourcing from India (89% utilisation rate) than from Bangladesh (86% utilisation rate) for the first time since the survey was launched. Also, nearly 60% of respondents plan to expand apparel sourcing from India over the next two years, exceeding the planned expansion from any other Asian country.
- Companies also emphasise on the importance of immediate renewal of African Growth and Opportunity Act (AGOA) before its expiration in September 2025 and extending the agreement for at least another ten years.
- Also, more non-Asian countries now figure in the top apparel sourcing destinations.
THE STUDY: This year’s benchmarking study was based on a survey of executives from 30 leading US fashion companies from April to June 2024. The study incorporated a balanced mix of respondents representing various businesses in the US fashion industry.
- Approximately 80% of respondents were retailers, 60% brands, 41% importers/wholesalers, and 3% manufacturers.
- The survey respondents included large US fashion corporations and medium-sized companies. Around 80% of respondents reported having over 1,000 employees; the rest (20% ) represented medium-sized companies with 100–999 employees.
THE CHINA FACTOR: Companies rated China as economically competitive as an apparel sourcing base compared to many of its Asian competitors regarding vertical manufacturing capability, relatively low minimum order quantity (MOQ) requirements, flexibility and agility, sourcing costs, and speed to market.
- Non-economic factors, particularly the perceived high risks of forced labour and geopolitical tensions, are driving US fashion companies to move sourcing out of China. This trend applies to surveyed US fashion companies selling products in China.
- Nearly 80% plan to reduce their apparel sourcing from China further over the next two years through 2026. Consistent with last year’s results, large-size US fashion companies with 1,000+ employees currently sourcing more than 10% of their apparel products from China are among the most eager to “de-risk.”
SOURCING FROM ELSEWHERE: For the second year in a row, three non-Asian countries made it to the top ten most utilised apparel sourcing destination list in 2024, including Guatemala (ranked 7th), Mexico (ranked 7th), and Egypt (ranked 10th). All three countries also witnessed an improved utilisation rate in 2024 compared to last year’s survey results.
- A new record 52% of respondents plan to expand apparel sourcing from members of the CAFTA-DR (Dominican Republic-Central American Free Trade Agreement) over the next two years, up from 40% in 2023.
- However, most US fashion companies consider expanding near-shoring from the Western Hemisphere as part of their overall sourcing diversification strategy. For example, nearly ALL companies that plan to increase sourcing from CAFTA-DR (Dominican Republic–Central America Free Trade Agreement) over the next two years also plan to increase sourcing from Asia.
- In 2024, about 65% of respondents reported sourcing from Mexico and Canada (or USMCA members), a noticeable increase from about 40% in 2019–20. About 36% of respondents say their companies “expanded apparel sourcing from USMCA members because of the agreement.”
AFRICA ANGLE: This year, companies sourced from seven AGOA members or countries in Sub-Saharan Africa (SSA), including Lesotho, Ethiopia (note: lost AGOA eligibility in 2022), Kenya, Madagascar, Mauritius, Tanzania, and Ghana, an increase from four countries in 2023, and six countries in 2022.
- Most respondents sourcing from AGOA in 2024 are typically large-scale US fashion brands or retailers with 1,000+ employees. Generally, these companies treat AGOA as part of their extensive global sourcing network.
- Over 86% of respondents support renewing AGOA for at least another ten years, and none object to the proposal. This reveals US fashion companies’ strong support for the trade preference programme and the non-controversial nature of continuing this agreement.
- Over 70% say another 10-year renewal of AGOA is essential for their company to expand sourcing from the region.
- About 30% of respondents had already held back sourcing from AGOA members due to the pending renewal of the agreement and associated policy uncertainty. This figure could increase to half of the respondents if AGOA is not renewed by the end of 2024.
- Another 30% of respondents indicate that keeping the flexible rules of origin in AGOA, such as the “third country fabric provision” for least-developed members, is essential for their company to source from the region.
THE RISKS: Companies pointed at growing sourcing risks of various kinds in 2024, from navigating an uncertain US economy, managing forced labour risks, and responding to shipping and supply chain disruptions to facing rising geopolitical tensions and trade protectionism.
- Over half of the respondents ranked “inflation and economic outlook in the US” and “managing the forced labour risks in the supply chain” as their top business challenges in 2024.
- The issues of “shipping delays and supply chain disruptions” and “managing geopolitics and other political instability related to sourcing” have newly emerged among respondents' top five concerns in 2024.
FORCED LABOUR ISSUES: Managing the risk of forced labour in the supply chain continues to be a top priority for US fashion companies in 2024.
- US fashion companies have adopted a comprehensive approach to comply with Uyghur Forced Labor Prevention Act (ULFPA) and mitigate forced labour risks.
- On average, each surveyed company has implemented approximately six distinct practices across various aspects of their business operations this year, up from an average of five in 2023.
- More than 90% are “Making more efforts to map and understand our supply chain, including the sources of fibres and yarns contained in finished products.”
- Nearly 90% of respondents report mapping their entire apparel supply chains from Tier 1 to Tier 3 in 2024, a significant increase from about 40% in the past few years.
