The American television show Saturday Night Live recently aired a sketch featuring a fast fashion company called Xiemu that sells $3.99 tank tops that it claims are, surprisingly, made with minimal lead and no labor strength. Hollywood star Jake Gyllenhaal plays an American buyer who is wary of the sale but, forced to reconcile principles and cheap prices, blithely opts for the latter.
The sketch goes to the heart of the global trade market. Rich countries send jobs to places with lower labor costs and environmental standards, and get cheaper products in return. If this involves pollution or child labor, don't worry! as SNL satire warbles.
Most of the time we don't. Despite all the talk about reindustrialization and buying local, American consumers continue to embrace fast fashion on platforms like Amazon as well as its Chinese counterparts Shein and Temu. Inflation has only exacerbated the trend.
But while consumers love cheap products, politicians worry about the impact on domestic industry and employment. This is one of the reasons why Shein wants to set up in London rather than New York. The threat of additional sanctions and tariffs against China has become a major obstacle to its remaining in the United States.
Can you have both affordability and morality? What if American consumer demand itself could fill this gap? It’s a question being asked by both U.S. businesses and policymakers interested in more resilient local supply chains.
Consider a new product collaboration between the nation's largest retailer by sales, Walmart, and American Giant, which manufactures a line of high-quality activewear in the United States.
AG T-shirts typically cost $45. But on July 4, Walmart will start selling an all-cotton AG T-shirt for $12.98, a few dollars more than the cheapest polyester-blend shirt it offers. The extremely low price required some margin sacrifice, but nevertheless represents a very profitable product for both the manufacturer and the retailer, according to AG. This was made possible by the scale of Walmart, which purchases not thousands, but hundreds of thousands of products per year, for several years.
The project is part of a $600 billion commitment by the retail giant to buy products made, grown or assembled in the United States, which began in 2013. That's a broad definition: to assemble something doing something locally is very different from making it from start to finish in-country. United States (the company would not release the volume of products made 100% in the United States, which is likely minuscule).
Still, given that 86 percent of Walmart customers say they want more of these types of products, there is a business case for doing so. The closer you are to the customer, the better off you are in terms of speed to market and, in the case of things like produce, freshness, Walmart says. For example, the company has invested heavily in hyperlocal vertical farming.
Placing products where customers are reduces transportation costs and emissions. Beyond that, American companies see clearly what is happening politically. Whoever is elected in November, the public sector will continue to push for reindustrialization.
Beyond offering scale, Walmart, which hosts a supply chain boot camp for new partners, has worked with AG suppliers to increase productivity in a way that has also sustained a fall in prices. There is a lot of skepticism about the possibility of reindustrializing and building more large-scale supply chains in the United States, says Bayard Winthrop, chief executive of American Giant. What eliminates this is a purchase order.
Textiles are a low-margin industry, with most production moving to China over the past two decades. But in a way, it makes the industry a perfect case study for what's possible in terms of reshoring. The answer: more than you think. I have seen during the pandemic US textile manufacturers drop the price of a US-made mask from 50 cents to between 25 and 30 cents, thanks to a strong demand signal from the government. Unfortunately, this signal disappeared after lobbyists toned it down at the state level.
Since then, 17 textile mills in the United States have closed, according to the National Council of Textile Organizations. Without more domestic buying, they can't compete with fast fashion retailers able to take advantage of de minimis loopholes for small international package shipments under $800. These loopholes also open the possibility for products made with, for example, forced labor or banned substances to enter the United States.
The president could close them. But to make the textile industry or any other American industry truly competitive in the long term, it takes more than tariffs or executive orders. It's all about demand signal incentives, says Defense Business Board member Christopher Gopal, who is working with the U.S. Department of Defense to explore how consumer demand could be harnessed to make industries more strategic, such as those of semiconductors or clean technologies, which are competitive again.
U.S. trade officials have long complained about the ease with which countries with cheap labor can gain access to the world's largest consumer market without much in return. The desire to mobilize the American consumer to support reindustrialization raises an interesting question: will American consumers pay a few dollars more to support local jobs? The shape of the U.S. economy could depend on the answer.
