Will the 90-day tariff exemption period lead to "export rush"?

On April 2, the Trump administration announced a comprehensive increase in reciprocal tariffs, including an additional 10% ad valorem tariff on all trading partners starting April 5. Beginning April 9, specific tariffs will be imposed on around 60 countries (those with significant trade deficits with the U.S. and several that have been previously reviewed for non-tariff barrier issues), such as a 34% tariff on China and a 46% tariff on Vietnam. The scope and rates of these reciprocal tariffs have exceed expectations.

Previously, China's textile and apparel capacity has been relocating to Southeast Asia to circumvent U.S. tariff policies. However, the Trump administration's indiscriminate imposition of reciprocal tariffs has essentially closed off the route for Chinese textile and apparel companies to export to the U.S. via Southeast Asia.

As a result, both direct and indirect exports to the U.S. have been urgently halted, causing panic among Chinese textile and apparel enterprises with production capabilities in Southeast Asia.

However, on April 9, there was a change when the White House suddenly announced a 90-day suspension of tariffs on 75 countries, reducing tariff rates from a maximum of 50% to 10%, but notably excluding China from the "exemption list" and increasing China's tariffs to 125%, signifying a decoupling of U.S.-China trade.

The announcement of the 90-day tariff exemption period means that the door is once again open for Chinese textile and apparel companies to "export via" Southeast Asia to the U.S. Many market participants believe that, as Southeast Asia is a major export region for China's polyester filament yarn, textiles and apparels, will the adjustment of tariff policies trigger a short-term rush in export demand?

In response, CCFGroup has conducted some preliminary survey recently.

Firstly, it is crucial to clarify a key point: for Chinese textile and apparel companies to export to the U.S. via Southeast Asia, obtaining local certificates of origin is essential. Simple transshipment is ineffective and is explicitly prohibited. Therefore, companies must process goods abroad to obtain the local certificates of origin to benefit from the U.S. tariff policies applied to those countries.

It was learned that textile and apparel businesses in Southeast Asia are indeed quite busy, and many are scrambling to export as much as possible to the U.S. within the 90-day window.

How much can this rush in Southeast Asia boost the export of raw materials and semi-finished products (fabrics and yarns) from China? it is believed that the impact may be limited.

For China, the textile and apparel capacity is substantial and there is overcapacity available. In past instances of export rushes, China has been capable of handling a large volume of U.S. orders in a short period and delivering before the tariffs take effect. A surge in orders usually leads to a significant increase in demand for fabric and yarn.

However, as for Southeast Asia, the textile and apparel capacity is limited, and many of these enterprises already have full orders at hand. In the short term, they cannot take on many new U.S. orders and meet delivery timelines. What they can do is fulfill existing orders as much as possible before the tariffs are implemented after the 90 days.

According to feedback from some domestic fabric suppliers, the previously paused fabric orders for overseas apparel factories resumed following the announcement of the 90-day tariff exemption period. Additionally, there are indeed some U.S. clients sending orders to specified domestic apparel factories for processing, which are then forwarded to overseas locations. However, the capacity of overseas apparel factories is limited, and they are unable to produce large quantities or handle more complex designs due to a lack of skills. Therefore, the overall increment is estimated to be very limited.