In the first half of 2026, China's textile exports show a clear divergence: upstream products like yarn and fabrics grew steadily, while apparel exports to the US contracted. Meanwhile, Vietnam and Bangladesh continued to import large volumes of Chinese man-made filaments and staple fibers. This contrast reveals an underestimated risk—'China Plus One' strategies that only relocate sewing operations may fall into compliance traps under rules of origin.
Rules of Origin: Tracing from Sewing to Yarn Source
US and EU enforce strict 'yarn-forward' rules for textiles. Origin is not determined by where garments are sewn but traces back to the production source of yarn and fabric. Even if a garment is assembled in Vietnam, if the core fabric is made in China, customs may still consider it of Chinese origin, excluding it from tariff preferences.
US customs data show that in January-June 2026, China's apparel imports to the US declined, while Vietnam and Bangladesh saw steady growth in their apparel exports to the US. Yet both countries imported high volumes of Chinese textile raw materials. This 'Chinese fabric + Southeast Asian sewing' division is a true picture of the current 'China Plus One' supply chain—and a hotspot for origin-related risks.
Industrial Impact: Upstream Strength and Downstream Risk Transmission
For Chinese companies, upstream fabric competitiveness remains strong, providing a buffer for exports but also reinforcing dependence downstream. Once Western customs strictly enforce origin checks, Southeast Asian factories may face retroactive duties or shipment detentions, which would then transmit to Chinese suppliers—orders canceled or prices squeezed, significantly reducing returns on overseas investments.
Deeper down, Vietnam and Bangladesh lack sufficient local spinning and weaving capabilities, making full local supply chains unlikely in the short term. This ensures continued dependence on Chinese materials. Thus, 'China Plus One' is not merely capacity relocation but a test of supply chain compliance capabilities. Companies that only calculate labor cost savings while ignoring origin rule implications may find that the cost of non-compliance far exceeds the tariff savings.
Practical Recommendations
For Buyers - Before sourcing overseas, require complete origin documentation, including traceability chains for yarn and fabric sources. - Build a dual-supplier base: keep high-value Chinese fabric channels, while evaluating local Southeast Asian alternatives to reduce compliance risks. - Clearly allocate responsibilities for tariff or penalty costs arising from origin checks in contracts to avoid disputes.
For Trading Companies - Map the entire chain of raw material sources, from fiber to yarn to fabric, to ensure compliance with destination country origin standards. - Invest in digital traceability systems for end-to-end tracking from procurement to finished garment export, ready for customs inspections. - Consult professional trade compliance advisors early to develop differentiated strategies for markets like the US and EU.
Supply chain restructuring brings both opportunities and tests. China's upstream strength remains solid, but the success of 'China Plus One' strategies depends on embedding compliance into every decision. Understanding the rules is key to safeguarding the bottom line in foreign trade.