The US 10% temporary global import tariff will expire on July 24, ushering in a new adjustment phase for tariffs on China. Keqiao, home to China Textile City, a major fabric distribution hub, hosts numerous textile merchants and trading firms focused on the US market. The interplay of short-term tariff relief and long-term cost pressures demands a clear export strategy for the second half of the year.
Dual Logic of Tariff Adjustment
A Sino-US framework agreement has been reached, with both sides committing to tariff reductions on at least $30 billion worth of goods. Textiles, apparel, and footwear are explicitly included, marking a positive signal for Keqiao traders. Chinese textile exports to the US have long faced 301 tariffs ranging from 7.5% to 25%, with combined rates reaching up to 45% for some categories, severely squeezing margins. If the full reduction list is implemented, additional tariffs on related products could drop significantly to most-favored-nation levels.
However, this short-term benefit coincides with the introduction of two new permanent 301 tariffs, replacing the expiring temporary tariff. One tariff, targeting alleged forced labor, covers 60 economies with differentiated rates. Mainland China and Hong Kong face a 12.5% surcharge, while 14 economies meeting compliance commitments pay only 10%. The textile and apparel sector has no special exemption, with only energy, rare earths, and a few pharmaceutical products excluded.
Another 301 investigation into global manufacturing overcapacity is expected to conclude within July, likely increasing costs for textile exports. Morgan Stanley estimates that after these new rules, the US average effective tariff rate will stabilize between 9% and 10%. Tariff barriers are transitioning from temporary measures to permanent rules, forcing Keqiao exporters to reassess their long-term cost structures.
Industry Transmission and Polarization
The impact of tariff adjustments is already evident. While tax cuts may slightly ease burdens and improve margins, the fixed 12.5% surcharge remains unavoidable. Southeast Asian countries' continued tariff advantages will attract more overseas buyers, accelerating order shifts for low-margin categories like basic garments and footwear. Keqiao merchants have reported a noticeable decline in US-bound orders in the first half of the year, confirming this trend.
Industry polarization is intensifying. Leading companies with overseas production capacity, high-end fabric R&D, and diversified sales channels leverage Keqiao's complete weaving, dyeing, and design supply chain to offset tariff impacts through efficiency and product premiums. In contrast, small manufacturers with homogeneous products and heavy reliance on US retail chains face dual pressures of rising costs and falling orders. The pace of industry consolidation is accelerating, squeezing the survival space for smaller players.
The US Trade Representative has introduced a textile-specific tariff buffer mechanism, offering additional rate benefits to companies meeting quota standards. The industry generally views the second half of 2026 through 2027 as a critical strategic window, but time is limited.