The U.S. 10% global temporary import tariff expires on July 24, 2026, triggering a new adjustment cycle for the tariff system on China. China Textile City, the national core textile fabric distribution base, hosts a large number of fabric merchants, home textile and footwear enterprises deeply engaged in the U.S. market. The market is intertwined with positive signals and operational pressures, requiring urgent planning for the second-half export layout.
Background
Previous China-U.S. trade negotiations reached a framework agreement, with both sides committing to tariff reductions on no less than $30 billion worth of goods. Textiles, apparel, and footwear are clearly included in the tariff reduction coverage, marking the most positive signal for merchants recently. For a long time, Chinese textile and apparel exports to the U.S. have faced additional Section 301 tariffs ranging from 7.5% to 25%, with combined rates for some categories reaching up to 45%, severely squeezing the thin profit margins of OEM enterprises. Keqiao's large-scale exporters of low-cost synthetic and knitted fabrics have been particularly hard hit.
If the full U.S. tariff reduction list is implemented, additional tariffs on related products could drop significantly to the base most-favored-nation rate. Meanwhile, the U.S. Trade Representative has also introduced a dedicated tariff buffer mechanism for textiles and apparel, offering additional rate benefits to quota-eligible enterprises. The industry generally views the second half of 2026 through 2027 as a rare strategic buffer window.
Industry Impact
Beneath the short-term tariff reduction dividends, two new permanent Section 301 tariffs will take effect simultaneously, replacing the expiring temporary tariff and imposing long-term cost burdens. One tariff, targeting alleged forced labor, has been finalized and completed public hearings. It covers 60 global economies with differentiated rates: mainland China and Hong Kong face a 12.5% additional tariff, while 14 compliant economies pay only 10%. Only energy, rare earths, and a few pharmaceutical products are exempt, with no special exemption for textiles and apparel.
Another Section 301 investigation into global manufacturing overcapacity is expected to be announced in July, likely adding further cost pressures on textile and apparel exports. Morgan Stanley estimates that after the two new rules take effect, the U.S. overall statutory average effective tariff will stabilize in the 9% to 10% range, transforming tariff barriers from temporary short-term policies into permanent normalized rules.
This tariff adjustment will bring two major changes to China's textile and apparel export industry. On one hand, tariff reductions can slightly ease tax burdens and repair profit margins, but the 12.5% fixed additional tariff cannot be avoided. Southeast Asian countries' persistent tariff advantages will continue to attract overseas buyers, accelerating order shifts for low-margin categories like low-cost garments and affordable footwear. Small and micro factories relying on basic fabric OEM face significantly increased order loss risks, with many merchants reporting notable declines in U.S. order volumes in the first half of the year.
On the other hand, industry polarization will intensify. Leading enterprises with overseas capacity, high-end fabric R&D capabilities, and diversified sales channels can leverage Keqiao's complete weaving, dyeing, and design supply chain to offset tariff impacts through supply chain advantages and product premiums. In contrast, single-factory enterprises with homogeneous products and heavy reliance on U.S. supermarket clients will face dual shocks of rising costs and shrinking orders, accelerating industry consolidation.