How Will America's Withdrawal from TPP Affect the Apparel World?

By March 23, 2017

Upon being sworn into the Oval Office last month, President Donald Trump wasted no time fulfilling one of his preeminent campaign promises by signing an executive order to end America's planned involvement in the Trans-Pacific Partnership. The trade deal, which Barack Obama's administration helped orchestrate, had not yet been put into action. And now it won't be, at least not with the biggest player involved.

What are the ramifications for the worldwide apparel industry?

First, let's recap what this agreement entailed, and why proponents supported it. The TPP was an accord between 12 countries intended to encourage open trade and economic growth. It called for big cuts on tariffs, and also included provisions to reduce environmental impact and human rights violations, among many other stipulations.

But while most people can get behind the guiding premise, there was significant controversy within the United States over the meat of the deal. Among the primary qualms, and ones that President Trump cited frequently, were insufficient measures to address currency manipulation and to keep jobs at home.

So, what does his assertive decision to immediately stamp America's withdrawal from the agreement mean for stakeholders in the clothing supply chain? The answer is: maybe not all that much, for the time being.  A study published by the US International Trade Commission last year found that the TPP would have minimal impact on apparel imports and exports. Some other participating countries – most notably Vietnam – figured to benefit but ultimately nothing was going to dramatically alter the textile trade landscape.

This is mainly because China, the powerhouse of the Pacific Rim, was conspicuously absent from the list of signatories. The country's decision to abstain was understandable enough – an in-depth academic analysis found that "payoffs to China following the TPP deal remain intangible and at best speculative."

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That the Trans-Pacific Partnership did not include China – and in fact may have served to stifle their economic hold over the region – makes Trump's stark opposition to it all the more curious, given that he's made the nation his No. 1 target in vocal critiques of existing international trade standards. And therein lies perhaps the most striking takeaway from this entire ordeal.

Without enactment of the TPP, business will mostly go on as usual in the world of apparel. In fact, the remaining countries may try to move forward with some form of the deal, though there is skepticism over its ability to float without US inclusion.

Trump's decision to pull out is a blow for many other parties involved, who were counting on the concessions that Obama was willing to make. The president now claims he will pursue bilateral deals on a case-by-case basis, although he may not be greeted warmly in negotiations after dismantling an accord that took nearly eight years to finalize.

It will be interesting to watch how things play out. His reputation as a masterful businessman helped get him to this position, and now we'll see if he can follow through.

Now that Trump is turning his brazen campaign talk into action, how will his "America First" mantra be received by other world leaders seeking mutual benefit? And what will happen now with China, empowered for the time being by this development? Trump's tough talk toward the country has led some observers to ponder the possibility of significant conflict.

For instance, The Economist recently published a piece theorizing how a trade war between the United States and China might play out. It's a compelling read, laying out several potential ramifications, but the conclusion says it all: "A trade war would mean abandoning an institution that recognises that countries are stronger when they work together."

At this time, Trump's abandonment of the TPP and generally isolationist rhetoric would seem to indicate a move away from the "stronger together" philosophy, but that may change as he begins to build relationships and better understand the fundamentals of this delicate ecosystem.

So many American retail giants in apparel, electronics and beyond are reliant on foreign imports to remain viable. Whatever your opinion of Trump, no one can deny his fierce motivation to keep and create jobs domestically. While his banter may be brash, it stands to reason that he'll pull back the throttle on suffocating free trade.

Of course, we will be watching closely and sharing our insights along the way.

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