Fashion: Worn in the USA, but made overseas (2024)

The United States is one of the world’s largest apparel markets, but 97 percent of the garments sold here are made elsewhere.

So it will come as no surprise if fashion is the first industry to be affected when President-elect Donald Trump launches his trade strategy after taking office on Friday.

The $380 billion industry is booming. But, as once-bustling sewing factories have disappeared in the U.S., American consumers have grown increasingly addicted to cheap, plentiful fashions assembled in such places as China, Mexico and Bangladesh.

Trump has vowed to slap China, America’s top garment supplier, with steep tariffs. Just last week, he promised to impose a “major border tax” that would punish all those companies that move jobs overseas and are “getting away with murder.” Also, congressional Republicans have embraced a proposal known as the border-adjustment tax, which aims to favor domestic production.

Tough talk on trade has made import-dependent retailers jittery and raised questions about how much policy makers can truly turn back America’s manufacturing clock.

Overseas, workers make as little as $500 a month to turn out pencil skirts and joggers that hang on racks in stores across the country.

“Removing the current incentive in the tax system to locate elsewhere will help,” said Alan Auerbach, an economist at UC Berkley and a champion of the destination-based tax. “It will lead to more investment and higher wages.”

But, he warned, it may not work in all industries.

“The cost differentiation is just too big” in some fields, he said, like mass-market clothing, where the labor and supply costs hit rock bottom outside the United States.

Coming apart at the seams

Southern California is home to the largest apparel-manufacturing center in the nation. On any given workday, 46,000 workers cut, sew and dye clothes in urban clothing factories, many in Los Angeles’ bustling fashion district.

But the local garment manufacturing base is half the size it was just a decade ago, and it’s getting smaller.

“We don’t know what’s going to come out of the Trump presidency, but I don’t think we are ever going to see a resurgence of the garment industry just given how broad scale the global map is,” said Marissa Nuncio, director of Garment Worker Center, a downtown Los Angeles workers rights group.

In 2015, importers stocking the shelves of stores such as Forever 21, Macy’s and Wal-Mart shipped in more that $85 billion worth of apparel, according to the American Apparel & Footwear Association.

Though the process started long ago, the erosion of domestic clothing-assembling jobs was something of a perfect storm:

• The North American Free Trade Agreement helped unlock the floodgates when it opened up markets in 1994.

• About the same time, computer-directed automation began to take hold for manufacturers.

• Add to that China’s entrance into the World Trade Organization in 2001.

From 1991 to 2015, imports of clothing multiplied by five as production of California-stitched clothing declined.

The local economic news wasn’t all bad. At the ports of Los Angeles and Long Beach, that amounted to more shipping containers, more work for dock crews, more brokers of goods and more port truck drivers pushing the sweaters, skirts and trousers on to Inland Empire warehouses and retailers around the West.

In 2015, local cargo handlers unloaded 512,000 20-foot containers filled with clothes.

The demand for affordable, swiftly assembled fashion kept the orders coming but also set manufacturers looking for ways to continue to lower their production costs.

“Unfortunately, it’s a sweatshop industry,” Nuncio said. “There’s competition around the globe for the lowest wages.”

Clothing assemblers in Los Angeles — many of them recent immigrants, including undocumented workers — are often underpaid, earning minimum wage and sometimes even less. Last year, the U.S. Labor Department cited Ross, T.J. Maxx and Forever 21 for illegal wage theft. And an analysis of randomly selected garment factories found 85 percent of the shops weren’t paying even minimum wage.

Even so, foreign manufacturers have those numbers beat. For example, in Bangladesh, one of the top five exporters of clothes, unskilled factory workers make less than $100 a month.

Can business go home again?

In the clothing business, being Made in America is tougher than ever, said Ilse Metchek, president of the California Fashion Association.

“The politicians are kidding themselves if they think that a border tax is going to bring (garment) jobs back,” she said.

It’s not just foreign competition, Metchek said, as manufacturers opt for high-tech methods that keep costs down and lead to fewer workers on the floor. “Everyone is looking at robotics and technology.”

For most industries, a tariff-propelled strategy will not “create more jobs for humans, it will create more jobs for robots,” said Richard Baldwin, an adviser to former President George H.W. Bush on trade and author of “The Great Convergence: Information Technology and the New Globalization.”

“Remember that the U.S. worker has been competing with robots at home and China abroad,” he said. “Blocking China will not make U.S. low-education workers competitive with robots.”

But proponents of the destination-based tax likely won’t accept such arguments. They’ve seen flickers of hope amid Trump’s daily tweets touting high-profile manufacturers who’ve decided to keep jobs in the U.S.

Auerbach and economist Douglas Holtz-Eakin argue that a border-adjustment tax, part of a larger corporate-tax restructuring “blueprint” set forth by House Republicans, isn’t a “trade policy” aimed to punish importers. Rather, they say, it’s a strategy for leveling the tax playing field between domestic and overseas competitors. That, in turn, should stimulate investment in American companies, they say.

Corporations are currently taxed upwards of 35 percent on worldwide revenues. The border tax would lower the rate and create a taxation on U.S. operations and consumption. Simply stated, when a product is imported, it would be taxed, and when exported, it would be exempt.

Retailers fear this will raise their labor and production costs and have been knocking on the doors of lawmakers, trying to shape any proposal introduced in the newly conservative Congress. With Trump at the helm, it’s clear the new regime will be eager to send the message that it will be friendly to business development.

“This could be devastating for the apparel and footwear industry,” said Stephen Lamar, executive vice president of the American Apparel & Footwear Association. “This increased tax burden would translate into higher shoe and clothing prices for American consumers and fewer jobs for American workers.”

While some cry “trade war,” economists such as Auerbach believe that the border tax could strengthen the dollar and offset tax costs by reducing the price of imports.

But critics brand such moves as protectionism that could be challenged by other countries at the World Trade Organization, the body that adjudicates international commerce disputes.

“Even though this is not technically a tariff, it could still be considered a violation of the WTO,” said Brian Peck, director of the Transnational Law and Business Center.

Retailers believe any strategy that includes a border adjustment tax would raise the cost of goods. Proponents say a robust economy will ease such concerns.

So, inevitably, the final arbiter may be the consumer, who’ll cast their votes on Amazon,com, at downtown boutiques and at mall-anchor department stores.