Halfway through 2026, China's textile exports present a tale of two extremes: upstream raw materials such as yarn, fiber, and fabrics maintain steady growth, while garment exports show notably weak momentum. Behind these figures lies the accelerating "China+1" supply chain model, and rules of origin are becoming an unavoidable new hurdle for textile trade.
Data Mirror of Supply Chain Restructuring
Public customs data show that in June this year, China's garment export growth was limited, while textile raw material exports performed strongly. The US market illustrates this clearly: imports of knitted and non-knitted garments from China both declined, while Vietnam and Bangladesh saw steady increases in garment exports to the US.
Notably, Vietnam and Bangladesh, while increasing garment exports, continued to import large volumes of man-made filaments, staple fibers, and other raw materials from China. This indicates that Southeast Asia's garment manufacturing has not severed ties with China's upstream supply chain; instead, it has formed a deep binding pattern of "Chinese materials + Southeast Asian sewing."
The Origin Trap: Sewing Location Is Not Origin
Many foreign trade companies once believed that moving garment assembly to Vietnam or Bangladesh and labeling them "Made in Vietnam" or "Made in Bangladesh" would circumvent tariffs imposed by the US and EU on Chinese goods. However, the EU and US enforce strict yarn-forward rules for textiles, where origin determination does not simply rely on the last sewing process but traces back to the source of yarn and fabric production.
If the core fabrics and fiber materials used in garments originate from China, and only cutting and sewing are done in Southeast Asia, customs audits may still deem the products as Chinese origin, denying tariff preferences. This means early relocation investments could be significantly undermined, and companies may face retroactive duties or cargo detention risks.
Industrial Response and Upstream-Downstream Transmission
This origin trap is not an isolated case but is prevalent in Southeast Asian textile hubs that rely on Chinese fabrics. Vietnam and Bangladesh lack sufficient local spinning and weaving capabilities, making full localization of the industrial chain difficult in the short term. Thus, their dependence on Chinese upstream materials will persist.
For domestic fabric suppliers, this is both a challenge and an opportunity. The challenge: downstream garment clients may adjust procurement strategies due to origin compliance pressures. The opportunity: if Chinese companies can provide fabrics that meet origin rules (e.g., by completing specific processes in third countries) or collaborate with Southeast Asian factories to build compliant supply chains, they can strengthen their upstream bargaining power.
Practical Recommendations
For Foreign Trade Enterprises - Compile full-chain traceability documents: ensure complete records of production origin and processing steps from fiber, yarn, fabric to garment. - Understand target market origin standards: US and EU rules differ; develop compliance plans for each, consulting professional trade lawyers when necessary. - Explore supply chain diversification: consider investing in spinning or weaving in Southeast Asia to increase local value-added and reduce the risk of being deemed Chinese origin.
For Fabric Suppliers - Proactively support clients' compliance: provide detailed certificates of origin and fiber composition reports to help garment factories meet traceability requirements. - Monitor regional value content rules: understand how RVC is calculated under different trade agreements to optimize export routes. - Establish risk early-warning mechanisms: track changes in US/EU customs policies, adjust export strategies promptly, and avoid cargo detention or retroactive duties upon arrival.
Under the wave of supply chain restructuring, the textile industry faces both opportunities and risks. The outward shift of garment manufacturing is inevitable, but China's competitive edge in upstream textiles remains solid. Only by understanding the rules and prioritizing compliance can enterprises secure their global operations, turning "traps" into "stepping stones."