In June 2026, China's textile exports showed a rare divergence: garment export growth was limited, while exports of upstream raw materials such as yarn, fiber, and fabric maintained strong growth. Meanwhile, US imports of Chinese apparel declined notably, while Vietnam and Bangladesh saw steady increases in garment exports, but their dependence on Chinese fabrics and fibers only deepened. This pattern of 'raw materials north, garments south' is pushing the 'China Plus One' strategy toward a compliance cliff.
Background
The so-called 'China Plus One' refers to companies establishing production bases outside China to diversify risks and avoid tariffs. Textile foreign trade enterprises commonly relocate garment assembly to Vietnam and Bangladesh, hoping to leverage local low-cost labor and preferential tariffs to enter Western markets. However, trade data from July 2026 reveal that simply moving sewing operations has not resolved trade risks; instead, it has created new rules-of-origin traps.
US Customs statistics show that China's knitted and non-knitted garment imports to the US have declined, while Vietnam and Bangladesh's imports of Chinese man-made filaments and staple fibers remain high. Large volumes of Chinese fabrics are cut and sewn in Southeast Asia and sold to the US under the label of 'made in other countries.' TexPro trade data confirm this supply chain divergence and expose the fragility of industrial relocation.
Industry Impact
The lethality of rules of origin lies in their 'look-through' tracing. The EU and US enforce strict verification of yarn and fabric sources; a garment's origin is not determined by where it was sewn but traced back to the production country of fibers and fabrics. If core materials come from China and assembly only happens in Southeast Asia, customs may still deem the product as Chinese origin, denying tariff preferences and exposing companies to back duties, detention, or even market access loss.
This means that if 'China Plus One' only relocates capacity without localizing materials, it merely shifts tariff risks from finished goods to raw materials. Vietnam and Bangladesh lack sufficient spinning and weaving capabilities, making full local supply chains difficult in the short term; their heavy reliance on China is a real weakness. For domestic enterprises, industrial relocation is not a panacea for trade barriers but a systematic project requiring full-chain compliance design.
For buyers and foreign trade companies, compliance costs are rising. The old 'assembly with local labels' model no longer works. Companies must sort out raw material sources, processing steps, and documentation traceability, establishing auditable supply chain files. Meanwhile, EU and US customs enforcement is tightening, with more frequent inspections; compliance flaws can lead to cargo detention, costing far more than labor savings.
Practical Recommendations
For Buyers - Prioritize suppliers that provide complete certificates of origin (e.g., RCEP) ensuring clear traceability of fabrics and yarns. - Include origin compliance responsibilities in contracts, stipulating that tariffs or fines due to origin issues are borne by the supplier. - Regularly audit suppliers' raw material purchase records and processing procedures; when necessary, commission third-party advance origin rulings.
For Foreign Trade Enterprises - Before building overseas plants, engage professionals to deeply interpret target market origin rules and assess 'substantial transformation' criteria. - Promote upstream material localization by partnering with local spinning and weaving mills in Southeast Asia to produce key raw materials locally. - Establish digital traceability systems recording full data from fiber to garment, ready for customs verification.
Supply chain restructuring is a long-term trend, but rule risks cannot be ignored. Understanding rules of origin is essential to turn 'China Plus One' into a true risk-hedging tool rather than a new trade barrier.