The expiration of the U.S. 10% temporary global import tariff on July 24, 2026, is reshaping strategic planning for Chinese textile exporters. In Keqiao, home to China Textile City, numerous fabric merchants, home textile firms, and apparel trade companies are caught between short-term gains and long-term pressures.
The Dual Logic of Tariff Adjustments
Sino-U.S. trade talks have reached a framework consensus on tariff reductions covering at least $30 billion in goods, including textiles and apparel. This is a positive signal for Keqiao merchants, as Chinese textile exports have faced Section 301 tariffs ranging from 7.5% to 25%, pushing combined rates as high as 45%. If the reduction list is finalized, additional tariffs could drop to most-favored-nation levels, and a new textile tariff buffer mechanism could offer further relief for qualified firms.
However, two new permanent Section 301 tariffs will replace the temporary measures. One targets alleged forced labor, imposing a 12.5% surcharge on China and Hong Kong, while 14 compliant economies face only 10%. Another investigation into global manufacturing overcapacity is expected to add further costs. Morgan Stanley estimates that the U.S. average effective tariff rate will stabilize at 9%-10%, turning temporary tariffs into a permanent rule.
Industry Polarization Accelerates
While tariff reductions offer modest relief, the 12.5% fixed surcharge remains unavoidable. Southeast Asian countries maintain a tariff advantage, drawing buyers away from low-margin segments like basic apparel and footwear. Keqiao has already seen declining orders for basic fabrics in the first half of the year, with small workshops and single-product factories at greatest risk.
Polarization is intensifying. Leading firms with overseas production, high-end fabric R&D, and diversified sales channels leverage Keqiao's complete supply chain to offset tariff impacts. Smaller players—with homogeneous products and heavy U.S. exposure—face rising costs and shrinking orders. The second half of 2026 to 2027 is seen as a strategic window, but its value depends on firms' ability to adapt.
Practical Recommendations
For Buyers - Monitor U.S. tariff lists and update pricing; include tariff adjustment clauses in contracts. - Prioritize suppliers with overseas capacity or high-end R&D for stable supply. - Discuss cost-sharing with suppliers early to avoid order disruptions.
For Exporters - Shift from low-margin basic fabrics to high-value categories like outdoor functional fabrics and designer textiles. - Diversify markets into ASEAN, the Middle East, and Latin America, while exploring domestic demand. - Maintain full traceability records to avoid compliance risks. - Apply for textile tariff buffer quotas promptly to reduce costs.
The tariff window is temporary, but long-term surcharges are now a fixture. Only by stabilizing existing orders, upgrading products, optimizing supply chains, and broadening sales channels can firms navigate the complex trade environment and secure sustainable growth.