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Industry Opinion
As we navigate the complexities of global trade, it’s worth examining some critical factors impacting industries like apparel manufacturing.
‘The Global Trade Equation’ opinion was initially posted by Charlie Merrow (CEO of The Merrow Group Companies) on LinkedIn.
Frank Henderson (President of Henderson Sewing Machine Co.) and David Billstrom (Advisor to Leaders, Passionate about Making in the U.S.A.) add their opinions.
What do you think is the best path forward?
Example: For T-shirt production: With a current tariff rate of 24% (from China), a new total tariff would need to climb by an additional 446% (to a staggering 470% total tariff) to fully neutralize the labor cost disparity between American and Chinese production.
Harmonized Codes & Tariffs:• Harmonized code for T-shirts: 6109.10• Current tariffs on Chinese imports:• Base rate: 16.5%.• Section 301 tariffs: +7.5%, bringing the total to 24%.
Labor Cost Comparison:• China: Average labor cost for stitchers (sewers): $3.50/hour.• USA: Average labor cost for stitchers (sewers): $20/hour.• Wage Gap: U.S. wages are approximately 470% higher than China’s.
What would it take to compensate?For T-shirts, assuming labor is the primary cost driver:• To offset the labor cost difference, tariffs would need to increase by 470% of labor costs.• With a current tariff rate of 24%, the new total tariff would need to climb by an additional 446% (to a staggering 470% total tariff) to fully neutralize the labor cost disparity.
Walmart example: this shirt --> https://lnkd.in/e-4di4kq: Walmart Chinese MSRP (Manufacturers Suggested Retail Price) $9.98-$10.98 (likely purchased for 1/3 MSRP or $3.62, with 24% tariffs + freight).
Walmart Chinese price with 470% Tariffs: $49.14 (likely purchased for 1/3 MSRP $16.17 with 470% tariffs + freight).
REMARKABLY – A t-shirt purchased for $16 and sold for $49 would allow for a robust USA manufacturing ecosystem to develop manufacturing T-shirts. DANGER – Tariffs in the 50%, 100%, and 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 this level could make U.S.-made goods competitive on labor cost grounds but would have major implications for pricing, supply chains, and consumers.• The conversation shouldn’t just be about tariffs—it’s about leveraging innovation, automation, and sustainability to bring balance to global trade.• USA State and Federal ‘American First’ purchasing programs would have a more significant impact on domestic manufacturing than tariffs unless the tariffs 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.
REMARKABLY – A t-shirt purchased for $16 and sold for $49 would allow for a robust USA manufacturing ecosystem to develop manufacturing T-shirts. DANGER – Tariffs in the 50%, 100%, and 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 this level could make U.S.-made goods competitive on labor cost grounds but would have major implications for pricing, supply chains, and consumers.• The conversation shouldn’t just be about tariffs—it’s about leveraging innovation, automation, and sustainability to bring balance to global trade.• USA State and Federal ‘American First’ purchasing programs would have a more significant impact on domestic manufacturing than tariffs unless the tariffs 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.
