The global fashion industry is undergoing a significant transformation as new trade policies from Western markets begin to take effect. Recent tariff hikes by the U.S. and EU—primarily targeting Chinese electric vehicles, batteries, and green technology—are sending shockwaves through supply chains worldwide.
Workers in a South Asian textile factory (Photo: The Hawk)
The China+1 Strategy and South Asia's Opportunity
For decades, South Asian nations like Bangladesh, India, Pakistan, and Sri Lanka have been key players in garment manufacturing, offering competitive labor costs and large-scale production capabilities. However, the new tariffs, combined with shifting trade dynamics, are forcing manufacturers and brands to rethink their sourcing strategies.
The so-called "China+1" approach—where companies diversify production beyond China—has already benefited countries like Vietnam and Bangladesh. Now, with additional trade barriers on Chinese goods, South Asia stands to gain even more, but not without challenges.
The Raw Materials Challenge
One of the biggest concerns for South Asian manufacturers is their reliance on Chinese raw materials. While the region excels in cut-and-sew operations, a significant portion of fabrics, yarns, and synthetic fibers are still imported from China. If tariffs extend to these inputs, production costs could rise, squeezing profit margins for factories already operating on thin margins.
Country-Specific Impacts
Bangladesh, the world's second-largest apparel exporter, has enjoyed duty-free access to the EU under the Everything But Arms (EBA) initiative and preferential treatment in the U.S. market. However, any disruption in the supply of Chinese materials could offset these advantages.
India, meanwhile, is positioning itself as a more self-reliant alternative. The government's Production-Linked Incentive (PLI) scheme for textiles aims to boost domestic manufacturing of man-made fibers, reducing dependence on Chinese synthetics.
Pakistan, despite its well-established textile industry, faces hurdles due to energy shortages and political instability, which could limit its ability to capitalize on the shifting trade landscape.
The Sustainability Imperative
Sustainability is another critical factor shaping the future of South Asia's fashion exports. The EU's Carbon Border Adjustment Mechanism (CBAM), though initially focused on heavy industries like steel and aluminum, could eventually extend to textiles.
Bangladesh, for instance, has already seen a push toward solar-powered factories and water-efficient dyeing techniques. Brands like H&M and Zara are increasingly demanding transparency and lower carbon footprints from their suppliers, which could further accelerate this shift.
Consumer Price Implications
For consumers, these changes may translate into higher prices, particularly in the fast-fashion segment. If tariffs and supply chain disruptions drive up production costs, brands could pass these expenses on to shoppers. Luxury labels, which often rely on European craftsmanship, might also see price hikes if they move production closer to home to avoid geopolitical risks.
The Road Ahead
The road ahead for South Asia's fashion industry is fraught with both opportunity and uncertainty. Manufacturers that invest in vertical integration, sustainable practices, and digital supply chain solutions will likely emerge as winners. Those that fail to adapt may find themselves struggling to compete in an increasingly complex and regulated global market.
As trade policies continue to evolve, one thing is clear: the era of relying solely on cheap labor and loose regulations is over. The future belongs to those who can balance cost, speed, and sustainability—and South Asia has a pivotal role to play in this new chapter of global fashion.
Image Credit: thehawk.in
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