The decade-old U.S. 10% global temporary import tariff will expire on July 24, marking the start of a new policy cycle for Sino-American textile trade. For Keqiao's China Textile City, short-term tariff reduction benefits and long-term tariff normalization are unfolding simultaneously. Export companies face not a single variable but a restructured system layered with multiple rules.
Short-Term Window: A Breather from Tariff Reduction Lists
Previous Sino-American trade negotiations have reached a framework consensus, with both sides agreeing to implement tariff reductions on at least $30 billion worth of goods. Textiles, apparel, and footwear are explicitly included, making this the most closely watched positive signal for Keqiao merchants. Chinese Customs data shows that U.S. imports of Chinese textiles and apparel have long faced additional 301 tariffs ranging from 7.5% to 25%, with some categories reaching a combined tariff of up to 45%, severely squeezing OEM profit margins. Keqiao's bulk exporters of low-cost synthetic and knitted fabrics have been particularly hard hit.
If the full tariff reduction list is implemented, additional tariffs on related products could drop significantly to basic MFN rates. The USTR has also introduced a dedicated tariff buffer mechanism for textiles and apparel, offering additional rate benefits to quota-eligible companies. Industry data and practitioner feedback indicate that the market generally views the second half of 2026 through 2027 as a rare strategic window.
Long-Term Pressure: Dual Normalized Tariffs Take Effect
Alongside short-term tariff reductions, two new normalized Section 301 tariffs will take effect, permanently replacing the expiring temporary tariff. One tariff, targeting alleged forced labor, has been finalized after public hearings. It 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%. Exemptions are limited to energy, rare earths, and a few pharmaceutical products, with no special exemption for textiles.
Another Section 301 investigation into global manufacturing overcapacity is expected to conclude in July, likely adding further cost pressure on textile exports. Morgan Stanley estimates that after both new rules take effect, the U.S. statutory average effective tariff will stabilize at 9%-10% long-term. This means tariff barriers have permanently shifted from short-term temporary policies to long-term normalized rules, and textile exporters must prepare for sustained cost pressure.
Industry Impact: Polarization Accelerates Market Consolidation
This tariff adjustment will bring two major changes to China's textile and apparel export industry. First, while tariff reductions may slightly ease tax burdens and improve margins, the 12.5% fixed surcharge remains unavoidable. Southeast Asian countries' persistent tariff advantages will continue to attract overseas buyers, accelerating order diversion for low-profit categories like basic apparel and budget footwear.
As China's core textile fabric distribution hub, the China Textile City hosts numerous fabric merchants, home textile, and footwear/apparel trading companies focused on the U.S. market. Many reported noticeable declines in U.S. order volumes in the first half of the year. Second, industry polarization will intensify: leading companies with overseas production capacity, high-end fabric R&D capabilities, and diversified sales channels 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 SMEs with homogeneous products and heavy U.S. customer concentration face dual shocks of rising costs and shrinking orders, accelerating market consolidation.