'We need tax benefits': K-fashion caught in Trump tariff crossfire

Home > Business > Industry

'We need tax benefits': K-fashion caught in Trump tariff crossfire

Published: 08 Apr. 2025, 07:00 Updated: 08 Apr. 2025, 17:19

Audio report: written by reporters, read by AI

Korean fashion designers show their clothes at Concept Korea 2025 FW in Paris on March 7. [NEWS1]

Korean apparel and footwear manufacturers are scrambling to assess the fallout from former U.S. President Donald Trump’s proposed tariff plan, which includes imposing reciprocal tariffs exceeding 30 percent on countries such as Vietnam, Bangladesh and Indonesia — key production hubs for Korean OEMs.

Industry sources said Monday that OEMs are rushing to develop countermeasures after Trump announced on Thursday that his administration, if reinstated, would apply high tariffs to imports from those countries — 46 percent for Vietnam, 37 percent for Bangladesh and 32 percent for Indonesia.

Korean OEM powerhouses such as Youngone Corporation, Hansae and Hwaseung Enterprise operate heavily in those regions.

A report from Daishin Securities’ research center found that 70 percent of Youngone Corporation’s production is based in Bangladesh. Hansae produces 50 percent of its goods in Vietnam, while Hwaseung Enterprise relies on Vietnam for 60 percent of its manufacturing and Indonesia for 30 percent.

These factories supply major U.S. fashion brands such as Nike, Adidas, Lululemon and GAP. Under typical OEM agreements, a client places orders, and a Korean manufacturer produces goods in Southeast Asia, which are then shipped to the United States.

University students show off their designs at the 2024 Korea-Asean Fashion Week held on Oct. 2, 2024 [NEW1]

While tariffs are technically the responsibility of the ordering brand, the reality is more complicated. Brands facing higher costs from tariffs may pressure OEM suppliers to absorb part of the burden. For instance, a company lowers the unit price from $50 to $45 to pay less to its subcontractors.

This presents a dilemma for Korean manufacturers. Refusing the price cuts could risk losing future orders, while accepting them directly erodes profit margins.

Hansae is particularly vulnerable, with 90 percent of its revenue tied to exports to the United States. Youngone Corporation and Hwaseung Enterprise derive 30 percent and 25 percent of their revenue from the nation, respectively.

“It’s not just about absorbing the tariffs,” said one official in the fashion industry on condition of anonymity. “We’re just as worried about a slowdown in overall U.S. consumption due to rising prices. That could ultimately lead to fewer orders.”

U.S. President Donald Trump delivers remarks on tariffs in the Rose Garden at the White House in Washington, D.C. on April 2. [REUTERS/YONHAP]

To mitigate risk, OEM firms are seeking to diversify their production bases. Hansae, in addition to its Southeast Asian operations, also runs facilities in Nicaragua and Guatemala. Roughly half the company’s production comes from these Central American sites. Guatemala, in particular, has vertically integrated operations capable of producing finished garments from raw yarn.

“We’ve been expanding our capacity in Central America since last year, so we expect to use those facilities — where tariffs are around 10 percent — to ease some of the pressure,” said a Hansae representative. “We’re also working to expand our business with European and Japanese clients to reduce dependence on the U.S. market.”

Youngone Corporation and Hwaseung Enterprise, which already have balanced revenue streams from the United States, Europe, and Asia, are also preparing counterstrategies and looking to expand sales outside the United States.

“Companies are trying to cushion the blow by diversifying their production sites,” said a Korea Fashion Industry Association official. “But this isn’t a problem individual firms can solve on their own. We need tax benefits and financial support measures tailored to these businesses.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY CHOI HYUN-JU, KIM KYUNG-MI [[email protected]]