Market Dynamics: Evaluation And Analysis Of The Impact Of Trade War On Cotton Textile Enterprises

On February 4 this year, the United States declared "protecting local industries" and formally announced that it would impose an additional 10% tariff on Chinese goods exported to the United States. On March 3, it added another 10% on the basis of fentanyl, with the cumulative tax rate as high as 20%.

On March 4, 2025, China launched counter-measures. China announced that it would levy an additional 15% tariff on American cotton from March 10, adding the original 28% base tax rate, and the total tax rate would rise to 43%, covering the entire chain of American agricultural products.

China announced counter-measures, and ICE American Cotton Futures plunged 3.35% on the same day, hitting a four-year low.

During the Sino US trade friction period from 2018 to 2019, the international cotton price experienced a wide range shock of 10% - 15%. The Trump 2.0 tariff policy is superimposed on the implementation of China's rapid and specific countermeasures. After the tariff pressure has reached a higher level, it is estimated that the price fluctuation may exceed the previous cycle.

In 2024, China will import 876000 tons of American cotton, accounting for 33.44% of China's total cotton imports that year. In the same period, Brazil's cotton exports to China reached 1.102 million tons, accounting for 42.10%. For the first time, Brazil surpassed the United States and became China's largest source of imports. The proportion of American cotton in the Chinese market has gradually declined from more than 50% in the mid-1990s, mainly due to the increased substitution effect of Brazil, Australia and other countries. The total cotton import volume of China in 2024/2025 is expected to be 1.589 million tons, with a year-on-year decrease of more than half. The overall import scale will shrink, and the actual export volume of American cotton may be lower than expected and further shrink.

In the short term, in the empty window period before the implementation of the policy, some overseas wholesalers may have centralized purchasing behavior. The wrong allocation of supply and demand will help to promote the international cotton price to rise in stages before the implementation of the policy, but for China, it is relatively calm. With the experience of the last round, and after years of cultivation and development, China's cotton textile industry will continue to turn to Brazil New cotton export substitution regions, such as Australia and India, are under the pressure of 15% increase in the CIF price of American cotton. The cotton price in the substitute production regions is 8% - 12% lower than that in the same period last year, which is conducive to the price recovery in the substitute cotton production regions. With the shrinking export share of American cotton, its impact on the global cotton price, especially on China's cotton price, will be further reduced.

In addition, the rise in costs after the tariff landing will also lead to some demand being suppressed, and the shrinking demand in the future may continue to drag down the cotton textile industry.