As populism gains — what happens to global apparel trade?
3-1-2025
AS POPULISM GAINS — WHAT HAPPENS TO GLOBAL APPAREL TRADE?
Nearshoring and domestic production offers a chance to rethink apparel sourcing strategies, and balance cost efficiencies with sustainability and equity, however the path forward isn’t clear-cut, writes Gherzi Textil Organisation partner Robert P. Antoshak.
Over the holidays, I caught up on my reading and gathered my thoughts about apparel trade in the new year. Pondering the future — gosh, there’s lots to consider. First, there’s Trump’s return, and the US political and legal system will be tested during his second term as president. However, we also have political tests in Germany, France, South Korea, and elsewhere. Wars in Ukraine and Gaza remain problematic. What gives?
It’s hard to ignore the headlines: the world is turning in on itself. Populism is gaining ground. Nationalism has seized the political high ground in many developed countries. Neoliberalism, the intellectual foundation of free trade and globalised business, has disappeared and been supplanted by jingoism, discussions of tariff wars, and the erosion of government institutions.
For the apparel industry, the dissipation of neoliberalism threatens traditional supply chains, wrecks sourcing strategies, and undermines the competitive advantage of many companies. Indeed, when the world globalised in the 1990s, our industry benefited from new sources of supply, increased competition, and improved margins. A lot of money was made. It was a wild party until it wasn’t.
Economics, politics, demographics, and a pandemic conspired to end the party. A clash of cultures only complicates things. Free trade and neoliberal policies were great for some but less so for many others. Wall Street boomed, and wealth concentrated at the top while average folks lost out. Jobs were lost through offshoring. Incomes stagnated for working stiffs. Anger boiled under the surface.
Then, the pot boiled over. The elites were called out. Nativism replaced globalism. Mistrust replaced faith. Deportation of people overtook the importation of goods. Expect new policies. Expect rejection of what used to work in favour of change — even if it is misguided. And expect rough waters. Am I simply mixing metaphors? I don’t think so. Let me explain.
Let’s talk tariffs
As we enter the new year, fear over Trump’s tariffs continues to dominate industry discussions about the markets. Common wisdom says that higher tariffs will act as a tax on consumers, which, put another way, means consumption will decline — not a good thing for a consumer industry like apparel that’s predicated on growth. But there’s more to the tariffs than that.
A new article in Foreign Affairs makes a compelling case for high tariffs but with some caveats. In “How Tariffs Can Help America,” Michael Pettis reexamines the role of tariffs in modern economic policy, arguing that comparisons to the infamous Smoot-Hawley Tariff Act of 1930 are misplaced. He also critiques the prevailing economic narrative that tariffs are universally harmful, emphasising the importance of context. While Smoot-Hawley exacerbated global economic woes during the Great Depression, today’s economic landscape offers a stark contrast.
The 1930s US economy suffered from overproduction and under-consumption, driven by income inequality and trade surpluses. Tariffs further restricted domestic consumption at that time, worsening economic conditions. However, Pettis notes that contemporary America faces opposite challenges: excessive consumption, low savings, and a significant trade deficit. Properly implemented tariffs could redirect demand toward domestic production, fostering growth, higher employment, and improved wages while reducing dependency on imports and foreign debt.
Pettis also draws parallels between the 1920s US and modern-day China. Much like the pre-Depression United States, China’s economy relies heavily on export-driven growth fuelled by excess production and suppressed domestic consumption. In such cases, tariffs or policies restricting trade can have deflationary effects, further destabilising global markets. He warns that China’s structural imbalances make it particularly vulnerable to US tariffs to curb trade deficits and reshape production.
Moreover, Pettis emphasises that tariffs are not a panacea, but when applied judiciously, they can help rebalance the US economy while mitigating the effects of China’s export-driven policies. Should Trump follow through with his tariff plans, sourcing companies may wish to consider domestic and nearshoring strategies as a smart hedge. This is food for thought.
But here’s the rub
Beyond sourcing there are broader strategies to keep consumers buying and propel clothing sales to ever-higher levels. Low prices will always attract consumers, but low prices and fast-churning, ever-changing product offerings lock in the deal. Social media plays a role, but artificial intelligence does, too, to rapidly assess consumer trends and identify what sells and what doesn’t. In this sense, technology weaponises fast fashion against itself, creating hyperfashion. Let’s take a look.
“The Walmart Effect,” which Rogé Karma published in The Atlantic, examines the broader economic impact of Walmart’s dominance in the US economy. Known for its low prices and status as the largest private employer, Walmart has long been praised for saving consumers money. However, two new research papers challenge this narrative, showing that the company’s presence often impoverishes communities despite its affordability.
Based on extensive individual-level data, one study found that households near a Walmart experienced a 6% income decline within a decade of its arrival. Even accounting for Walmart’s cost savings, the income losses outweighed the benefits, leading to an 8% rise in poverty rates. Another study comparing counties with and without Walmart revealed similar income declines, impacting various industries, not just retail.
Karma associates these effects with Walmart’s monopolistic practices. By driving out local businesses and exercising monopsony power over workers and suppliers, Walmart suppresses wages and diminishes employment. This dominance disrupts local economies, creating a cycle in which Walmart’s low costs further entrench its market power.
The findings challenge the consumer welfare standard used in US antitrust policy, emphasising the hidden costs associated with low prices. The article concludes that while Walmart’s model benefits consumers in the short term, it imposes significant long-term economic costs on communities.
I’m not picking on Walmart, but you know what? Walmart has struggled to compete with Amazon and, now, Shein and Temu. Is the world changing? Yep. And we’re only now coming to grips with a new reality. The race to the bottom has become turbo-charged with technology fuelling an ever more powerful engine.
So, what now?
A curious aspect of commerce is how businesses find ways to make money, regardless of obstacles. For instance, if you slap a tariff on China, what happens? Trade moves to other countries but often benefits Chinese companies indirectly. This is the adaptability of global supply chains. Still, the question remains: Can the same creative energy be harnessed to address the more profound inequities and structural flaws in international trade?
These shifts present both challenges and opportunities for industries with tight margins, such as apparel. The push for nearshoring and domestic production offers a chance to rethink sourcing strategies, invest in local communities, and balance cost efficiencies with sustainability and equity. But the path forward isn’t clear-cut. Companies will need to innovate, governments must recalibrate policies, and workers — often the ones most affected by these shifts — deserve a seat at the table.
Populism’s rise and accompanying retreat from globalisation reflects legitimate grievances but also a failure to address the broader impacts of neoliberalism. To move forward, stakeholders across industries must grapple with these complexities and ensure that the benefits of commerce are more evenly distributed. After all, the goal isn’t just to survive these seismic shifts but to emerge stronger and more equitable on the other side.
Last month Antoshak predicted that the global textile and apparel industry in 2025 would be defined by its ability to navigate a world of rising protectionism, shifting geopolitical alliances, and increasing demands for sustainability
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