The historic economic understanding between US President Donald Trump and Chinese President Xi Jinping, reached in Busan last week, may have eased pressure on a few politically sensitive commodities like soybeans and rare earths but for the $350-billion global textile and apparel trade, it has brought only a brief pause in turbulence, not a turnaround.

For US apparel importers and Asian exporters alike, the one-year tariff truce means a freeze on pain rather than a path to recovery. The looming threat of a 100 per cent tariff has been averted, but the punitive 47 per cent cumulative tariff on Chinese garments remains intact, locking both economies into a fragile, high-cost equilibrium. “For our customers, this is not a rate cut; it’s a freeze on a heart attack,” says Sarah Chen, a US-based trade consultant. “The existential threat is gone, but the long-term reality is that US apparel remains the most expensive in the world to import from China.”

Tariffs still weave the costliest fabric

The agreement leaves the core of Section 301 duties untouched. While overall tariffs on Chinese imports have been lowered from an average of 57 to 47 per cent, the apparel sector, unlike semiconductors or agri-inputs remains excluded from substantial relief. For US retailers, that means duty payments continue to eat into already thin margins. Apparel brands are caught between absorbing the cost or passing it to consumers each option eroding competitiveness.

Table: Tariff burden on US apparel importers

Source: Industry estimates and White House Fact Sheet on new 47% cumulative rate.

The table underscores how the 47 per cent cumulative tariff continues to define the landed cost structure for US apparel importers. Even with the Busan truce, a men’s cotton shirt priced at $15 FOB effectively costs over $22 after tariffs, a 47 per cent boost before logistics and retail markup. For brands, this means the average imported garment from China remains nearly one-and-a-half times its base manufacturing price by the time it clears customs. The tariff freeze, while avoiding further escalation, keeps operating margins severely compressed. In retail terms, this has translated to sustained 5-8 per cent higher shelf prices for mid-market US fashion brands. It also means deferral of private-label expansion, as companies hesitate to commit to China-heavy supply chains. And greater inventory concentration in tariff-free categories, like accessories or blended-origin products. In essence, the US apparel supply chain remains structurally uncompetitive as long as Section 301 tariffs persist turning stability into stagnation.

Cotton relief a rare win for china’s textile mills

The only direct relief for the textile supply chain comes from China’s decision to suspend its 25 per cent retaliatory tariffs on US cotton. This move reopens a crucial artery of trade between the world’s largest cotton consumer and the US, its traditional supplier.

Table: Impact of China's suspended retaliatory tariff on US cotton

This data highlights a rare mutual win in the trade standoff: the removal of China’s retaliatory duty on US cotton. By cutting the tariff from 25 per cent to 0 per cent, Chinese mills immediately save about $380 per metric ton of cotton, restoring direct access to high-quality American fiber. The ripple effects are significant. Chinese textile mills regain cost competitiveness versus peers in India and Pakistan, where raw cotton prices remain volatile. US cotton farmers, particularly in Texas and Mississippi, regain access to their largest export market, stabilizing prices that had fallen 18 per cent in 2024. And global yarn prices could ease modestly (2-3 per cent), as cheaper cotton inputs filter through production chains.

This cost reprieve reinforces China’s upstream strength in yarn and fabric production, offsetting the disadvantage of high tariffs on finished goods. It also revives interdependence between the US cotton belt and China’s textile heartlands a pragmatic economic bridge amid ongoing political friction.

The ‘China Plus One’ strategy meets a pause

The truce reshapes the momentum for Vietnam, Bangladesh, and India three major beneficiaries of the US-China trade war. For years, these countries absorbed diverted apparel orders as brands sought to derisk from China. The 47 per cent tariff freeze, however, slows that diversification push by reducing near-term urgency.

Table: Comparative US apparel tariff rates post-truce

Source: WTO, USITC, and apparel trade association estimates

Vietnam and Bangladesh still enjoy substantial tariff advantages, but the freeze on escalation weakens their investment narrative. China’s cheaper input costs (via US cotton) may even enhance its competitiveness relative to its Southeast Asian neighbors, given Vietnam’s heavy dependence on Chinese fabrics.

India, in contrast, faces an unexpected reversal. Following new US-specific duties on Indian textile products, its exports have become more expensive than Chinese goods, a significant blow to the Make in India agenda and to its rising role as a diversification hub.

Ripples across Asia

Vietnam’s wait-and-watch policy: Knitwear factory in Hanoi saw order volume rise 40 per cent (2021-24). Large US orders are now on hold as buyers reassess supply chain risk. The focus is on value-added, high-quality SKUs where tariff savings outweigh higher production costs.

Bangladesh’s volume-driven stability: High-volume denim and T-shirt manufacturer in Dhaka saw minimal downside and 27-point tariff gap with China keeps orders flowing. Their strategy is aggressive pursuit of volume contracts to lock in low-cost market share.

The regional case studies demonstrate how each manufacturing hub is adapting its playbook to the truce’s partial stabilization. Vietnam’s growth boom is pausing as US buyers wait for the next tariff cycle. Bangladesh’s mass-production model remains robust, sustained by low tariffs and entrenched scale. India faces an uphill climb as recent US duties reverse its cost advantage, forcing exporters to pivot toward EU, Middle East, and Japan markets instead.

Together, they illustrate a clear strategic theme: tariff policy now determines investment flows more than cost efficiency or labor advantage. And these contrasting outcomes highlight the new fragmentation of Asia’s apparel ecosystem.

The bottomline is that the Busan agreement buys the textile trade one more year of predictability but not peace. The 47 per cent tariff remains the binding thread that dictates sourcing costs, retail pricing, and investment flows. The upside lies primarily in cotton price normalization and supply chain stability. The downside is strategic paralysis: no meaningful relief for US importers, no new stimulus for Southeast Asia, and a worsening competitive position for India. “The trade war isn’t over, it’s just between seasons,” opines a senior executive at a US apparel conglomerate. “Everyone’s waiting for the 2026 renegotiation to know whether to rebuild in China, or to finally move out for good.”

And for now, the global textile and apparel trade hangs together stabilized by compromise, yet constrained by cost. The Busan truce is a temporary patch, not a repair. As 2026 looms, the industry faces a familiar dilemma: adapt under a heavy tariff blanket, or unravel when the next round of negotiations begins.