Fashion brands ‘caught between a rock and a hard place’ over US-China rivalry

While the Xinjiang issue has been a controversial one for brands since the accusations first emerged in 2022, the swift reaction to Fast Retailing’s statement shows that it’s still a sore spot for the Chinese market. But while not using Xinjiang cotton may anger China, doing the opposite risks angering the U.S. and its allies. The U.S. has its own censures for brands that do use cotton from Xinjiang in the form of the Uyghur Forced Labor Prevention Act — the legislation fines companies for buying materials from the Xinjiang region. The U.S. has already seized billions of dollars worth of merchandise based on UFLPA violations. And on Tuesday, U.S. lawmakers expanded the number of companies that are subject to the UFLPA, adding 29 new names and bringing the total up to 109.

Meanwhile, China has its own official censures for brands shunning Xinjiang cotton. Companies like PVH are under investigation from Chinese authorities for boycotting Xinjiang cotton.

“European companies find themselves increasingly caught between a rock and a hard place: if they cease operations in, or sourcing from, regions like Xinjiang, they may face a severe backlash from both the government and consumers in China; if they stay, they risk negative consequences from their home and other international markets, including reputational damage and penalties under European and/or U.S. legislation,” read a statement from the European Chamber of Commerce in China in September.

Xinjiang cotton and the use of forced labor is just one of many contentious issues that have arisen in the ongoing economic rivalry between the U.S. and China, two of the largest consumer markets in the world. Fashion brands often have large businesses in both markets, but increasing tensions between the two mean that these brands must more frequently thread the needle to avoid angering either market.

“Brands operating in both the U.S. and China face unique challenges, especially as economic and political tensions between these regions continue to escalate,” said Todd Redwood, global managing director of retail and consumer goods at the British Standards Institution, which produces technical standards on a wide range of consumer products globally.

Redwood suggested a number of strategies brands can use to navigate tricky issues between the U.S. and China, including reducing dependence on a single region for materials, tailoring messaging for different parts of the world, and proactively engaging with governments and industry groups to navigate new regulations.

“Establishing a crisis management plan can also help businesses effectively communicate and ease stakeholder concerns,” Redwood said. “As transparency can help foster trust, it is important for brands to educate consumers on their ethical commitments without explicitly aligning political narratives.”

The election of Donald Trump and his promises to heavily tax imports from China has only added to the difficulty for brands caught between the two markets. Even the Biden administration has used its power to strike at China, including by attempting to close the de minimis exemption which was benefiting low-cost Chinese fashion brands.

Retail strategist Jeanel Alvarado, CEO of Retailboss, said that both U.S. companies and consumers should expect the rivalry between the U.S. and China to affect prices. She cited a 50% tariff on washing machines enacted by the Trump administration in 2018 that immediately led to a 12% price hike on the appliances in the U.S. Moves like this are incentivizing brands to move their production away from China — brands including Steve Madden and E.l.f. already did so last month.

“The ripple effect of such price increases can reduce consumer surplus and dampen economic growth, as businesses face higher costs and reduced competitiveness in the U.S. market,” Alvarado said. “To better navigate the challenges ahead posed by the potential trade barriers, brands should shift production away from countries facing potential tariffs and expand manufacturing in less tariff-sensitive markets.”