On July 24, 2026, the U.S. 10% temporary global import tariff will officially expire, marking the start of a new adjustment cycle for tariff policies toward China. As the core textile fabric distribution hub in China, China Textile City (Keqiao) hosts a large number of fabric merchants, home textile, and apparel trading companies deeply engaged in the U.S. market. The industry now stands at a critical strategic juncture, with short-term tariff reduction benefits and long-term permanent tariffs arriving simultaneously.
Short-Term Window: Limited Relief from Tariff Reduction Lists
Previous Sino-U.S. trade negotiations have reached a framework consensus, with both sides agreeing to implement tariff reductions on no less than $30 billion worth of goods each. Textile, apparel, and footwear categories are explicitly included in the coverage of tariff reductions—the most positive signal Keqiao merchants have seen recently. For years, Chinese textile and apparel exports to the U.S. have been subject to Section 301 tariffs ranging from 7.5% to 25%, with some categories facing combined rates as high as 45%, severely squeezing the thin profit margins of contract manufacturers. Keqiao's large-volume exporters of low-cost chemical fiber and knitted fabrics have been particularly hard hit.
If the full U.S. tariff reduction list is implemented, the additional tariffs on related products could be significantly lowered to the basic most-favored-nation rate. Additionally, the U.S. Trade Representative has introduced a dedicated textile and apparel tariff buffer mechanism, allowing companies meeting quota standards to enjoy additional tax rate benefits. The industry generally views the second half of 2026 through 2027 as a rare strategic buffer window.
However, it is crucial to recognize that this benefit is essentially "limited relief." While the tariff reduction can slightly ease corporate tax burdens and restore some profit margins, it cannot fundamentally reverse the high-cost export landscape.
Long-Term Pressure: Two Permanent Tariffs Reshape Cost Structures
Alongside the short-term tariff reduction, two new permanent Section 301 tariffs are being implemented, completely replacing the expiring temporary tariffs and becoming long-term fixed costs.
The first is a dedicated tariff related to forced labor, which has been finalized and undergone public hearings. The policy covers 60 economies globally with differentiated rates. Mainland China and Hong Kong are subject to an additional 12.5% tariff, while 14 economies that have fulfilled compliance commitments face only 10%. The textile and apparel industry has no special exemption channels; only energy, rare earths, and a few pharmaceutical products are exempt.
The second is a Section 301 investigation into global manufacturing overcapacity, with results expected to be announced within July, likely further increasing cost pressures on textile and apparel exports. Morgan Stanley estimates that after the two new regulations take effect, the overall U.S. statutory average effective tariff rate will stabilize in the 9% to 10% range. Tariff barriers have formally shifted from short-term temporary policies to long-term permanent rules.
This means that even if the tariff reduction list is realized, Keqiao exporters will still face a fixed 12.5% surcharge. For low-margin, price-sensitive fabric OEM companies, this is almost equivalent to further profit compression.
Industry Impact: Accelerated Order Shifts and Polarization
These tariff adjustments will bring two visible changes to the domestic textile and apparel export industry.
On one hand, the persistent tariff advantages of Southeast Asian countries will continue to attract overseas buyers. Order shifts for low-end garments and low-cost footwear are expected to accelerate. Small stalls and micro-factories relying solely on basic fabric OEM face significantly increased order loss risks. In the first half of the year, many merchants have already seen a noticeable decline in U.S. order volumes.
On the other hand, industry polarization will intensify. Leading companies with overseas production 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 shocks through supply chain efficiency and product premiums. In contrast, single-factory operations with highly homogeneous products and customer bases concentrated in U.S. retail chains will face the dual impact of rising costs and shrinking orders, accelerating industry consolidation.