Potential job losses of 10,000 in the textile industry could be triggered by US tariffs
Impact of U.S. Tariffs on Portugal's Textile Industry
The textile sector in Portugal, a significant part of the country's economy, has been facing challenges due to the U.S. tariffs on European textiles.
Loss of Competitive Advantage
Portuguese textile exporters, who have traditionally catered to both luxury and mid-market segments in the U.S., are now grappling with higher costs due to the tariffs. This erodes their price competitiveness against U.S. and other global producers.
Pressure on Profit Margins and Market Share
Portuguese companies are left with two options: either absorb the increased costs, which reduces profits, or pass them onto customers, risking loss of market share in the highly competitive U.S. market.
Job Risks and Industry Contraction
The tariffs intensify existing pressures from lower-cost Asian producers, putting revenue, production levels, and employment in Portugal’s textile industry at risk.
Supply Chain Shifts
European brands, including those involving Portuguese producers, may seek to reshape supply chains to avoid tariffs by near-shoring production within tariff-friendly regions or diversifying export markets to Asia and the Middle East. However, this transition demands time and investment.
Higher Consumer Prices
The tariffs contribute to higher prices for apparel and textile products in the U.S. market, with consumers facing increases of 17-37% on clothing and related goods overall. This indirectly impacts European exports’ demand elasticity.
While broad labor market impacts such as layoffs and factory closures are documented primarily in Asian countries under higher tariffs, the European textile sector, including Portugal, faces indirect risks from declining orders as buyers shift sourcing strategies.
Immediate Concerns
In the last few days, the Government in Portugal has received 30 business associations that export to the U.S., reflecting the industry's concerns. The textile industry in Portugal is at risk of losing a substantial number of jobs, with the textile industry's association warning of potential job losses totaling ten thousand in the next two years.
The U.S. market accounted for 8% of textile exports, amounting to approximately 500 million euros in 2021. The U.S. tariffs could potentially result in a significant decrease in exports for national companies.
Recently, the U.S. reached an agreement with Brussels at the end of last month. However, some clients have already reduced their orders in the textile industry due to the tariffs. The tariffs imposed by the U.S. could potentially change the current situation for Portugal's textile industry.
- The increased costs for Portuguese textile exporters due to U.S. tariffs could lead to potential job losses totaling ten thousand in the next two years, as stated by the textile industry's association.
- The U.S. tariffs on European textiles, which accounted for 8% of textile exports, amounting to approximately 500 million euros in 2021, pose a significant risk of decreasing exports for national companies in Portugal's textile industry.
