The U.S. Is Using 'Substantial Transformation' to Measure Who Is Truly 'Made in Vietnam'

In December 2024, a garment factory in Jordan producing for a U.S. brand had its entire shipment seized by U.S. Customs and Border Protection (CBP). The reason was labor compliance issues. However, during the textile origin audit, CBP simultaneously initiated a traceback of the 'substantial transformation' standard for these garments—where did the fabric come from? Does cutting and sewing constitute a 'substantial transformation'? If the answer is no, the tariff on these goods would be assessed based on the fabric's country of origin, not the exporting country Jordan.

This incident triggered a chain of panic within the textile industry far beyond Jordan's borders. Not because Jordan's production capacity is significant—it accounts for less than 1% of U.S. apparel imports—but because CBP is turning the 'substantial transformation' yardstick from a traditional origin determination principle into an enforcement tool that can dig up old records and trace every link in the supply chain at any time.

The power of this yardstick lies in the fact that it does not prohibit you from relocating production, but it determines whether the relocated production qualifies as 'new origin' production. If you merely cut and sew Chinese fabric in Vietnam, CBP could one day tell you: This is not Made in Vietnam; it is still Made in China because no 'substantial transformation' occurred. And you would have to pay back all the tariffs you underpaid for the past three years by claiming the Vietnamese rate.

This is precisely the core logic of current U.S. trade policy's impact on textile industry relocation: not building walls at the border, but establishing a traceable, retroactive, and enforceable compliance system at the rule level. This article begins with the technical definition of 'substantial transformation' to dissect how this system forms a multi-layered containment of Chinese textile production capacity through Section 122 tariffs, USMCA reviews, vessel fees, and Hormuz risks—and what companies should really do now that relocation has already happened: not run farther, but build deeper compliance systems.

I. A Seemingly Neutral Yardstick: What Exactly Is 'Substantial Transformation'

'Substantial transformation' is the core legal standard U.S. Customs uses to determine the country of origin of imported goods. The definition is simple: if a product undergoes a fundamental change in name, character, or use after processing in a country, that country is the product's origin. This is not a new concept—similar principles existed in 19th-century U.S. tariff law precedents.

But its enforcement in the textile industry is becoming unprecedentedly complex and stringent.

Take a men's cotton shirt as an example. The typical production path in Vietnam: import fabric from China → the Vietnamese factory cuts, sews, and irons the garment → export the finished product to the U.S. Under the traditional 'substantial transformation' standard, sewing cut pieces into a garment changes the product from 'fabric' to 'apparel', with a fundamental change in name and use—on paper this should constitute substantial transformation, allowing the shirt to be considered Vietnamese in origin and subject to Vietnam's U.S. tariff rate.

The problem is that CBP's audit logic in recent years has shifted from 'what is the finished product' to 'where were the core processes completed'. And the textile industry has an inescapable physical fact: weaving and finishing (dyeing, waterproofing, flame retardancy, etc.) contribute 60%–70% of the fabric's value, yet most companies relocating production leave these two processes in China, moving only cutting and sewing to Vietnam. When CBP begins using 'value contribution share' and 'location of core processes' to assess substantial transformation, a significant portion of the processing done in Vietnam may legally not constitute substantial transformation at all.

Here we need to clarify a point often confused: 'substantial transformation' and 'specific processing operation lists in rules of origin' are two different concepts. The U.S. currently has no unified, quantitative test standard for substantial transformation in textiles—and that is precisely the problem. There is no written regulation specifying 'what percentage of value added counts as substantial transformation' or 'which processes must be completed'. This means CBP has considerable discretionary power.

CBP can make case-by-case determinations based on the following factors:

• Whether processing changes the name, character, or use of the product
• The complexity and degree of specialization of the processing operations
• The percentage of value added
• The substantiality and critical nature of the processing

According to industry knowledge bases on textile HS codes and tariffs, the U.S. also has more specific rules for textiles and apparel—origin is generally determined by the place of 'fiber spinning', 'fabric weaving', or 'complete assembly', with different standards applying to different categories. For apparel, the 'place of assembly' (i.e., sewing location) is typically used as the country of origin. However, this rule is not fixed by law—when CBP suspects that the assembly process is too simple and insufficient to constitute substantial transformation, it has the authority to initiate a case-by-case investigation.

More critically, a subtle shift in U.S. trade policy since 2025: CBP's origin audits for textiles are no longer 'passive spot checks' but active tracebacks upstream in the supply chain. They not only look at where final assembly occurred, but also where the fabric was woven, where the yarn was spun, and where the fibers came from. This shift is a direct product of the Section 122 tariff environment—when tariffs on Chinese fabric rise from below 10% to higher levels, the tariff differential between Chinese fabric and Vietnamese fabric creates enormous profit incentives, naturally making it a key target for CBP scrutiny.

II. Relocation Has Already Happened—and Gone Deeper Than Most Imagine

To understand why the tightening of the 'substantial transformation' standard is so critical, we must first look at a set of data to see the scale of relocation.

The share of U.S. imports of textile fibers (including waste) from China has fallen from about 12.75% in 2005 to about 0.02% in 2022 (based on a report from the China Finance and Economics Research Institute). That is a drop of 99.8%—essentially zeroed out. In the apparel and accessories category, China's share of U.S. imports fell from about 21.86% in 2005 to about 3.58% in 2022, while Vietnam's share rose from negligible to about 17.16% over the same period.

According to COMTRADE data, total U.S. textile and apparel imports in 2024 were US$112.9 billion, with Vietnam exporting US$15.94 billion, accounting for 14.1%, making it the second-largest U.S. textile and apparel trading partner (per Vietnam's Nhan Dan newspaper report). In footwear, Vietnam contributed US$9.38 billion to U.S. imports in 2024, a 28.1% share. In March 2025, Vietnam's share of U.S. footwear imports reached 39.1%, an all-time high; China's share fell to 26.7%, the lowest in 33 years (per Vietnamese trade counselor data cited by customs).

Behind these numbers is a massive relocation of production capacity by leading Chinese textile companies. BROS Eastern has built about 1 million spindles of yarn capacity in Vietnam, accounting for about 60% of its total (cross-verified by multiple public company announcements and research reports). Shenzhou International holds 50% of its fabric capacity and 40% of its garment capacity in Southeast Asia, with over 28,000 employees, two garment factories, and one fabric base in Vietnam (data cited by Henan Guangda Textile Import & Export Co.). Huafu Fashion has built 300,000 spindles of spinning capacity and 20,000 tons of dyeing capacity in Vietnam. Tianhong Textile has developed a full industrial chain from spinning to garment making in Vietnam since 2014. Huoli Group has 100% of its production capacity overseas, with Vietnam as the dominant base (per East Money Research Institute report).

These are results, not beginnings. The driving force for relocation accelerated significantly after the 2019 U.S.-China trade friction. According to East Money Research data, from 2017 to 2021, China's compound annual growth rate of textile and apparel exports to the U.S. was +7.2% and +2.4% respectively, but athletic shoes had already shown negative growth of -2.1%. By January-April 2023, China's apparel exports to the U.S., EU, and Japan fell by 14%, 20.4%, and 2.5% year-on-year respectively (per Caixin report).

The root cause of relocation is not a single tariff policy. It is the accumulation of three pressures: rising labor costs in China (Vietnam's manufacturing monthly wage is about US$300 vs. Zhejiang's about US$618), continuously tightening environmental standards (new environmental protection laws have imposed stricter COD emission limits for printing and dyeing, from 100mg/L in 2013 to even lower levels—per the China Finance and Economics Research Institute report), plus the precise targeting of U.S. tariff policies. According to a May 2026 report from Vietnam's official media VietnamPlus, the U.S. tariff on Vietnam was reduced from 46% to 20% after bilateral negotiations. The Vietnam Textile and Apparel Association publicly stated that given Vietnam is the largest Southeast Asian exporter to the U.S. and the fourth-largest deficit country, this rate is 'relatively reasonable'. But for companies that have already invested tens of millions or even hundreds of millions of dollars in Vietnam, 20% is still not zero—and it adds another layer of uncertainty: could this rate change again?

This is where the first paradox appears: companies relocated to Vietnam to avoid tariffs, but after relocation, they find Vietnam is also being taxed. And the tightening of the 'substantial transformation' standard means that capacity that moved but kept core processes in China (fabric weaving and dyeing) may not even retain the 'Made in Vietnam' label if CBP traces back.

III. The First Wall Hit After Relocation: You Moved the Factory, But Not the 'Manufacturing'

Deconstructing the cost structure and process distribution of a typical Southeast Asian production facility reveals how thorny this problem is.

Take a pair of men's long trousers produced in Vietnam and exported to the U.S. The weaving, dyeing, and finishing of the fabric most likely take place in Shengze or Keqiao, China. These finished fabrics are exported to Vietnam in roll form. The Vietnamese factory performs cutting, sewing (15-20 operations), ironing, inspection, and packaging—about 1 cutting operation, 15-20 sewing operations, and 3-4 each for ironing, inspection, and packaging. It looks like Vietnam does a lot, but according to the two dimensions CBP increasingly emphasizes in 'substantial transformation' case determinations—value contribution share and core processes—fabric cost accounts for about 50-60% of the total garment cost. Weaving and dyeing determine the garment's color, hand feel, luster, and functional prototype. While sewing turns 'fabric' into 'garment', morphologically it is indeed a new product, but in the value chain it is an extension of fabric value, not the creation of entirely new value.

In recent years, CBP's origin rulings on textiles show a repeated tendency: they are increasingly dismissive of 'simple assembly processing'. What constitutes 'simple'? There is no written percentage line, but from multiple CBP rulings on textile and footwear origin disputes in 2024, several patterns emerge: if core raw materials (fabric/base/liner) come from Country A and only cutting and sewing are done in Country B, CBP's probability of ruling Country B is not the origin significantly increases; if Country B also completes dyeing (meaning the full process 'greige fabric → dyed fabric → garment'), CBP is more likely to recognize Country B's origin qualification.

Here lies the problem: Vietnam's dyeing capacity is far behind the volume of Chinese fabric exports. Dyeing is a capital-intensive, high environmental hurdle, and highly skilled-labor-intensive process. Tianhong and BROS have built spinning and some weaving capacity in Vietnam, but dyeing and large-scale finishing still rely heavily on China—because Vietnam's environmental approvals are increasingly strict, and although industrial water costs are lower than in Zhejiang, wastewater treatment infrastructure is insufficient. This means that a large amount of 'finished' garments in Vietnam still have their fabric core processes in China. When CBP tightens the 'substantial transformation' standard, these capacities are the most vulnerable.

Some might say: why not simply move fabric weaving and dyeing to Vietnam as well? In theory, yes, but this is a systematic project that would take over a decade to complete—and even if completed, it would hit another rule wall, which we will dissect later.

IV. The Second Wall: The U.S. Simultaneously Tariffs China and Vietnam—'Relocation Barrier' Becomes 'Mobility Barrier'

The most noteworthy change in U.S. trade policy after 2025 is not how much tariffs on China have increased, but that the tariff target scope has expanded from 'targeting China' to 'targeting all textile-exporting countries with high surpluses to the U.S.'

In April 2025, the U.S. announced a 46% reciprocal tariff on Vietnamese goods. Although this rate was reduced to 20% in May after bilateral negotiations (per multiple sources including VietnamPlus and B-Company), 20% is still not zero. More critically, the mechanism of this rate change gives the U.S. a 'long-arm adjustment' space: as long as Vietnam's trade surplus with the U.S. continues to expand, there is reason to raise tariffs again. A chairman of a garment company in Hung Yen, Vietnam, publicly stated that companies are gradually shifting from simple OEM to FOB models, asking clients to share the tax burden, and actively exploring new markets such as Russia, Australia, and New Zealand (per VietnamPlus report).

Meanwhile, U.S. tariffs on Chinese textiles and apparel are at multi-year highs. The additional tariffs under Section 301, combined with base tariff rates, make the total tariff on Chinese-made apparel entering the U.S. much higher than that on neighboring countries. Combined with Section 122 tariff rules—which allow the president to impose additional tariffs or quotas on imports for national security and balance-of-payments reasons—the U.S. has enormous room to maneuver on textiles.

Putting these together: previously, companies only needed to consider the cost gap between 'China + tariffs' versus 'Vietnam + zero tariffs'. Now it becomes 'China + high tariffs' versus 'Vietnam + 20% + uncertainty'. Although Vietnam's 20% is still lower than China's, the gap is narrowing. More troublesome, Chinese companies have already invested billions of dollars in factory construction in Vietnam, based on the assumption that Vietnam is a zero-tariff springboard. When that assumption breaks, sunk capital cannot be recovered, but willingness to invest further diminishes significantly.

Deeper risk: the U.S. is simultaneously taxing China and Vietnam, but the absolute values differ. For a garment with an FOB price of US$5—Chinese production may face a comprehensive tariff of about 30%, or US$1.50—Vietnamese production faces 20%, or US$1.00. The difference is only US$0.50. Can this US$0.50 cover the logistics cost of shipping Chinese fabric to Vietnam (7-10 days sea freight plus customs clearance and warehousing at both ends, about US$0.3-0.5 per garment), higher management costs in Vietnam (expatriate salaries plus frequent travel), and compliance costs from 'substantial transformation' audits (legal fees, certificate of origin application fees, potential retroactive tax risk reserves)? In many cases, the answer is no.

More alarmingly, logistics cost variables are shifting from 'implicit' to 'explicit'. In May 2026, tensions in the Strait of Hormuz directly pushed international oil prices above US$100 per barrel (per a UN economic outlook report released on May 19). For containers carrying Chinese fabric via the Suez Canal to Mediterranean and European clients, insurance premiums have risen and the extra cost of diverting around the Cape of Good Hope has already materialized. However, the impact on short-haul sea routes between China and Vietnam is relatively small—the real damage is on routes from China through Suez to the Middle East and Africa. Nevertheless, high oil prices have a knock-on effect on all sea routes—according to the Shanghai Shipping Exchange, the US West Coast route index rose about 18% from the beginning of 2026, with shipping costs rising across the board.

When transportation costs eat up a significant portion of the tariff differential, the economic rationale for capacity relocation is no longer self-evident.

V. The Third Wall: USMCA Review—North America Is Closing Its Door to Chinese Fabric

If the first two walls primarily affect China and Vietnam, the third wall has a broader impact: it blocks the path for Chinese companies to bypass the U.S. market through Mexico.

USMCA (U.S.-Mexico-Canada Agreement) has a unique clause: a joint review every six years. The first review is scheduled for 2026. And Trump repeatedly expressed dissatisfaction with USMCA during his campaign, specifically naming Mexico's 'loophole' in trade with China—Chinese goods transshipped through Mexico, with minimal processing, labeled 'Made in Mexico' to enter the U.S. market. After the first US-Mexico bilateral talks in May 2026, it is highly likely that USMCA's textile rules of origin will face stricter revisions.

Under current USMCA rules, textiles enjoy tariff preferences only if the key processes in the chain—fiber → yarn → fabric → garment—are completed within the member countries (U.S./Mexico/Canada). This is the well-known 'Yarn Forward' rule of origin. Specifically, for a T-shirt to qualify for USMCA zero-tariff treatment, the yarn must be spun from fibers sourced from a USMCA member, the fabric must be woven in a USMCA member using that yarn, and the garment must be sewn in a USMCA member using that fabric. Fabric from China, or fabric woven in Japan from Chinese yarn, does not qualify.

But in reality, many 'Made in Mexico' garments use fabric imported from China, because Mexico's textile chain is incomplete—spinning and some weaving exist, but high-end functional fabrics (such as ePTFE membrane composites for waterproof breathable fabrics, precision weaving and dyeing of micro-denier polyester knits) still rely on China. These fabrics enter Mexico, are cut and sewn into garments, and are claimed as complying with origin rules under USMCA. CBP initiated trace audits on multiple Mexican textile imports in 2024 and 2025.

A core topic of the 2026 USMCA review is upgrading the 'Yarn Forward' rule to 'Fiber Forward'—requiring that the fiber itself must originate from a USMCA member country. If this is written into the revised agreement, all products using Chinese fibers (even if the fabric is woven in Mexico) would lose tariff preferences. Another possible tightening direction is increasing the Regional Value Content (RVC) requirement—currently, RVC for textile and apparel products is already stipulated in USMCA, and the review may raise the threshold further.

For Chinese companies that have already placed some production capacity in Vietnam, a stricter USMCA will not directly affect Vietnam's export path to the U.S. (since Vietnam is not in USMCA), but it will close the indirect route of 'China → Mexico → U.S.'. More profoundly, if USMCA successfully raises the origin threshold for textiles and creates a replicable template, the U.S. is likely to promote similar rules in bilateral agreements with other trading partners. This means that the road blocked today via Mexico may be blocked tomorrow via Vietnam—even under CPTPP or other trade frameworks, as long as origin rules align with USMCA, the room for 'origin washing' will be systematically squeezed.

VI. The Fourth Wall: Customs Enforcement Has Upgraded from 'Spot Checks' to 'Tracebacks'

The seizure at the Jordanian garment factory caused panic not because Jordan is important, but because CBP's enforcement logic has changed.

Traditional customs audit logic: spot-check at declaration → find non-compliance → seize or collect back taxes. The starting point is 'whether the information on the customs declaration is truthful'. CBP's inspection of the Jordanian factory, however, involved 'selecting a batch from import records months or even a year ago, and tracing back the entire supply chain for compliance'. This is not about finding loopholes on the declaration; it is about digging into history for goods already entered.

The lethality of this 'traceback review' lies in:

Inevitability. Traditional spot checks are a probability game—you only check a small portion of containers cleared that day; most goods get through. Traceback reviews can pull up all import records from the past two or three years and examine each one. The probability is 100%.

Coordinated enforcement. The seizure of the Jordanian factory was nominally about labor compliance (suspicion of forced labor), but the actual inspection scope included origin compliance. CBP has the authority to cross-use different legal tools in the same case—initiate an investigation under labor provisions, penalize under tariff provisions. One nail can move the entire compliance system.

Full supply chain penetration. CBP did not look only at the Jordanian factory. It required the factory to provide all fabric purchase records, import declarations, and payment documents. Through the fabric supplier records, they traced back to which Chinese factory the fabric was purchased from, what yarn (Chinese or Indian) was used, and where the pretreatment chemicals came from. If any link in this chain is deemed 'non-compliant' by CBP (for example, using Chinese Xinjiang cotton subject to the UFLPA restricted list), the entire shipment could be seized, and even the brand could face joint liability.

For all companies that have shifted production capacity to avoid tariffs, this means: you are not only moving factories and equipment; you are moving a 'subject of review qualification'. To obtain that qualification, you must upgrade your entire supply chain's compliance record from 'declaration-level compliance' to 'full chain-level compliance'—traceable, verifiable, auditable. For most Chinese companies, this compliance requirement is harder to overcome than tariffs themselves, because it involves not just money, but information system reconstruction and business logic reorganization.

VII. Shipping and Geopolitics: When Hormuz Forces You to Recalculate Logistics Costs

Among the cost variables in supply chain restructuring, logistics is often the most overlooked—because it is not as directly visible as tariffs on the customs declaration. But the Hormuz crisis in the first half of 2026 is pushing this hidden cost to the forefront.

According to a UN economic outlook report released on May 19, 2026, the escalating Middle East conflict is impacting the global economy through rising energy prices and supply chain disruptions. Oil prices remained above US$100 per barrel through mid-year, with a gradual decline to around US$80 in the second half of the year. The Shanghai Shipping Exchange reported that the U.S. West Coast route index rose about 18% from the beginning of the year.

The impact on Chinese textile fabric exports is layered.

For containers destined for the U.S. West Coast (from Shanghai/Ningbo/Shenzhen to Los Angeles/Long Beach), the shipping route does not pass through sensitive Middle East areas; the direct impact is mainly increased bunker adjustment factors. The surcharge per 40-foot container is a few hundred dollars more compared to pre-conflict levels, translating to an increase of about US$0.02-0.05 per meter of fabric. This increment is significant but not fatal for bulk fabric exports (e.g., a container of conventional polyester fabric worth US$50,000-80,000).

The real hit is on routes through the Suez Canal to the Mediterranean, Western Europe, and the Middle East. If the Strait of Hormuz faces actual passage risks or complete closure, containers from China to Europe may have to go around the Cape of Good Hope, extending the voyage from 30 to over 45 days, with a cost increase of about US$1,500-2,500 per container (industry estimates based on historical data on the Suez/Cape alternative routes). For high value-added functional fabrics—such as Gore-Tex composites, high-end silk, or worsted wool fabrics—this incremental freight can be absorbed. But for conventional filament synthetic fiber fabrics at FOB prices of US$2-3 per meter, the diversion cost can be catastrophic—freight could exceed 10% or even more of the cargo value.

This creates a chain effect: under the dual pressure of tariffs and freight, customers (U.S. brands or European importers) will recalculate the total cost of 'sourcing fabric from China vs. from Vietnam/Turkey'. If Turkish fabric is 10% more expensive per unit but freight is one-third of the China-Europe route, and Turkey's tariff with the U.S. may also be lower—once that calculation is done, orders may shift to Turkey, not Vietnam, and certainly not China.

There is also a sub-question: when will Section 122 tariffs expire or be replaced by new legislation? If the U.S. 10% baseline tariff (the additional part beyond Section 301) continues to constitute a hard cost on fabric exports, and freight remains high, the dual cost will accelerate the U.S. 'China+1' sourcing strategy. Currently, no official document confirms the expiry date or replacement legislation for Section 122—this uncertainty itself is a policy risk premium. Buyers making long-term contracts will require suppliers to offer additional price concessions to hedge against policy uncertainty.

VIII. 'Blockaded' Does Not Mean 'No Way Out'—But the Breakout Path Is Completely Different from What Was Thought Before

Putting all four walls together, a very interesting picture emerges: the U.S. is using four pillars—tariffs (Section 122 + 301 + Vietnam tariff), rules of origin ('substantial transformation' + USMCA review), enforcement tools (CBP traceback reviews), and natural geographic risks (Hormuz crisis)—to build a system for layered traceability and graded taxation of the global textile supply chain.

The core of this system is not to completely block the export of Chinese fabric—that is impossible. China is the world's largest producer of chemical filament fabrics. Within a 100-km radius from Shengze to Keqiao, the entire chain from spinning to finished product can be completed. No country can replicate this level of industrial clustering and efficiency. What the U.S. is really doing is: penalizing on cost those who try to evade tariffs by simple physical relocation, and making the cost of 'origin washing' exceed the tariff savings through enforcement. When the sum of compliance costs and tariff costs exceeds the cost of staying in China, relocation becomes uneconomical.

So what should companies do? The answer is not to run farther, but to build deeper.

First, compliance systems must be upgraded from 'declaration compliance' to 'full chain traceability'. Do not wait until CBP audits you to start organizing procurement records. Establish a documentation system that can trace back to the yarn and fiber level. This is the real talisman. The work is tedious, but the textile industry actually has a foundation—textile production is naturally batch-managed (dyeing batch, weaving batch, yarn batch). It is just that no one previously needed to format this data for compliance audits. Now it must be done.

Second, re-understand 'substantial transformation'. If your Vietnam factory only does cutting and sewing, that is not enough. Either move fabric weaving and dyeing to Vietnam (large investment, long time, but once and for all), or add enough value-added processes in Vietnam—for example, digital printing (heat transfer or direct-to-garment pigment printing as secondary processing can enhance the complexity and value share of the Vietnam end with relatively lower investment, helping to strengthen the 'substantial transformation' compliance evidence chain, though whether CBP accepts it depends on case-by-case rulings)—or complete fabric finishing (waterproof, stain-resistant, UV-protective functional finishes) in Vietnam.

Third, emphasize in-house tariff planning and tax compliance teams. Tariff calculations under Section 122 and Section 301 are not 'one-size-fits-all'—different HS codes, different processing methods, and different origin declarations apply different rates. The same fabric may be classified under HS 5208 (cotton woven fabrics ≥85% cotton ≤200g/m²) or HS 5210 (cotton <85% mixed with man-made fibers ≤200g/m²), with completely different tax rates. A knowledgeable customs broker can legally save a company considerable tariffs through accurate HS code classification—the money saved could be more than a fabric factory's annual savings on electricity and water.

Fourth, pay attention to a perspective most people overlook: the mechanism of U.S. fees on Chinese vessels. The U.S. has revised the collection rules for the Harbor Maintenance Tax (HMT). Although no specific additional fee clause targeting 'Chinese vessels' has appeared in public reports, such discussions repeatedly arise in USTR and congressional hearings. Once implemented, it could increase the unit logistics cost of Chinese textile fabric exports to the U.S. by a few percentage points. This is easier to ignore than tariffs, but it would directly affect all Chinese fabric—whether transshipped through Vietnam or exported directly, as long as the final transport into the U.S. is considered 'Chinese fleet', the fee will be added. Proactively establishing transport solutions with logistics providers that primarily use non-Chinese flagged vessels is a practical action to address this potential risk.

IX. Comprehensive Impact on Global Chemical Filament Fabric Exports: The Data Speaks

Since 2019, China's textile and apparel export data show a clear trajectory of structural change.

According to COMTRADE data analysis, China's dependence on the U.S. market is decreasing. The value of U.S. imports from China under HS Chapter 61 (knitted apparel) changed from about US$17 billion in 2019 to an unspecified level in 2024 (COMTRADE 2024 data does not differentiate the exact amount of U.S. imports from China under HS Chapter 61), but it is known that China's total knitted apparel exports in 2024 were about US$85.3 billion, and woven apparel exports were about US$67.8 billion, totaling over US$150 billion. Globally, China exports over US$250 billion worth of textiles and apparel annually. Among these categories, exports of woven fabrics of man-made filaments grew notably, reaching US$29.7 billion in 2024, accounting for nearly 12% of China's textile exports. Man-made staple fibers (US$13.7 billion), knitted fabrics (US$23.8 billion), and coated fabrics (US$10 billion) also hold important positions.

However, it is noteworthy that the growth rate of China's exports to the U.S. has begun to decline. Export growth for some HS codes has almost stalled. Meanwhile, India's exports to the U.S. in this category roughly doubled from 2019 to 2024. This is not just 'substitution' but 'diversion'—U.S. market dependence on Chinese fabric is indeed decreasing, but the speed and magnitude vary by product category. Highly technical categories (such as micro-denier polyester knitted fabrics, composite functional fabrics) are declining more slowly due to high technical barriers and difficulty in substitution, while conventional categories (such as regular polyester plain woven fabrics, cotton-blend shirting fabrics) are being substituted faster.

From a logistics cost perspective, the sea freight price for a 40-foot high-cube container from Shanghai to Los Angeles has remained at higher-than-pre-pandemic levels. Pre-pandemic it was about US$1,500-2,000 per container, and during 2024-2025 it fluctuated between US$3,000-6,000, heavily affected by the Red Sea crisis and port congestion. This means the per-unit transportation cost for a container has at least doubled compared to five years ago. This cost puts more pressure on low-value fabrics than on high-end fabrics.

X. Vietnam Is Not the Only Answer—and Why Turkey Might Become the Next Stop

Now that Vietnam is also subject to tariffs, the next natural candidate for capacity relocation is Turkey.

Turkey's advantages: it is a member of the EU Customs Union, so textiles enter the EU duty-free; it has the Generalized System of Preferences (GSP) and bilateral investment agreements with the U.S., with tariff rates much lower than the current 20% on Vietnam; it has a relatively complete industrial chain from spinning to garment making, particularly strong in cotton and wool; its geographic distance—a few days by truck to major European cities, and just days by sea to U.S. East Coast ports—makes supply chain reaction times faster than Southeast Asia.

But Turkey's disadvantages are also clear: labor costs are higher than Vietnam and Bangladesh, with average monthly wages around US$400-500 (industry estimates); although the chain is complete, its scale is far smaller than China, and capacity for synthetic and functional fabrics is limited; the model of directly competing with Chinese fabric exports cannot be achieved in the short term. However, Turkey as an alternative sourcing location in the 'China+1' strategy is becoming an increasingly common destination for European and American brands.

Returning to China itself: in this multi-layered siege, what are the strengths of Chinese textile enterprises? A complete industrial chain (any link from PTA polymerization to garment making can be found within 500 km), stable delivery capability (the Keqiao spot market can assemble hundreds of fabric types within hours), and continuously improving technological innovation (digital printing is making zero minimum order quantities possible—as I have detailed before in the introduction to the textile industry chain, the core competitiveness of this industry lies in the efficiency and flexibility brought by agglomeration).

The weaknesses are also clear: export compliance systems cannot keep up with enforcement rhythm; many companies still respond to the U.S. market with 'declaration compliance' rather than 'full chain compliance'; there is insufficient deep understanding of rules of origin, thinking 'just moving the machines over is enough'; and they react passively to uncertainty rather than actively managing it.

China's share of textile and apparel exports to the U.S., EU, and Japan is undergoing subtle changes. According to COMTRADE data, in 2024 China's knitted apparel exports totaled US$85.3 billion, and woven apparel US$67.8 billion. In the U.S. market, China's apparel share continues to decline while Vietnam's share rises rapidly—Vietnam accounted for 14.1% of U.S.