What will happen to the world's most vulnerable workers if the Trump administration’s impending tariff frenzy is not resolved? The world has become dependent on global value chains. What we don't like to talk about, but which should be obvious, is that we live comfortably precisely because others do not. Namely, those making a living in large manufacturing countries, sewing our clothes, among other things.
Some worry about a higher price tag on consumer goods. More important is the fate of workers, especially textile workers, whose future looks even more bleak due to rising tariffs.
The US upends global markets with tariff threats
The tariffs are futile. One of the main reasons for this is that tariffs are justified both in terms of ‘bringing back’ jobs to the USA and levelling out alleged trade imbalances with other countries. You can solve some problems with tariffs, but you can't both smooth out trade imbalances and believe that this will simultaneously create more jobs in the USA.
The consequence, however, is that if the tariff war is not resolved, US companies will have an expensive price tag attached to production of goods abroad. The US government, before pausing and postponing the deadline, imposed tariffs on Bangladesh of 37 per cent, Cambodia 49 per cent, Sri Lanka 44 per cent and Laos 48 per cent. In contrast, Jordan has been given 20 per cent and Ethiopia the ‘standard’ 10 per cent, which also rely on clothing and textiles industries. The Jordanian textile industry, which primarily employs women, exports nearly exclusively to the USA at 79 per cent of total exports and a reduction could cut up to 15,000 jobs.
How will tariffs affect workers in global supply chains?
US apparel companies are already considering how they need to shift production to be able to offer goods to the US market at low prices. As I see it, there are two likely scenarios that may affect those who work in these global value chains.
If there is a major exodus of production from Bangladesh, Cambodia, Sri Lanka and Laos, which have large textile and garment industries, a large proportion of the population will lose their livelihood. These are workers who are already not guaranteed a living wage and have little to fall back on. In Cambodia and Bangladesh, the textile industry accounts for respectively 70 and 80 per cent of the country's total exports.
At the same time, other countries will see increased production as companies hunt for countries with lower tariffs. But here, too, we have no guarantees of better conditions for workers. There will be far too much pressure on some factories, which will find it difficult to say no to new orders. There is a real risk of excessive overtime and outsourcing to so-called ‘shadow factories’ with even lower standards for decent working conditions due to less oversight. This can also happen if a country, for example, Cambodia negotiates a deal with the USA, while Bangladesh and Sri Lanka are not so lucky, and the flow of production flows to Cambodia.
Corporate sustainability in times of political instability
There has been a tradition of development through mutually favourable trade agreements, but this rug has been pulled out from under the table. The Trump administration is disregarding the development-through-trade-perspective that have helped low-income countries in the past build up industries. These trade agreements, with low tariff rates, have benefited companies with global supply chains in the way that they have allowed companies to produce goods abroad while paying minimal import taxes. Since the new tariffs threaten to increase the total cost of goods produced abroad, companies must choose to either stay loyal to suppliers with higher tariffs, or look elsewhere to produce goods to maintain the prices consumers in the USA expect.
Corporate sustainability matters the most when things get difficult. So, what options are available to companies with global supply chains who want to make a stand against the Trump’s administration’s damaging policies against global workers?
Maintaining a good dialogue with suppliers is essential to give clarity and foreseeability about future orders. Long-term supplier relationships create security for jobs and can, in the long term, influence better working conditions in factories. This is the case especially if you source a large percentage from the factories to give more leverage to influence working conditions. Unfortunately, factories in Cambodia are reporting less volume in orders due to the tariffs uncertainty. This operational instability directly affects the jobs of textile workers.
Factories struggle during off season and often require a flexible workforce to keep payroll costs down. Setting clear corporate goals for production in the off season can help factory owners avoid this volatility. If more companies aimed to produce garments in off season, it again would give foreseeability for factory owners to keep staff year round: securing income for vulnerable workers.
If changes need to be made and remaining with a supplier is no longer an option, having a responsible exit policy gives suppliers time to find new business. Policies such as these are important to avoid abruptly ending contracts which in the end affect the families of the workers in factories.
Good supplier dialogue, sustainable production goals and responsible exit policies are examples of how companies can embed the principles of the UN Guiding Principles on Business and Human Rights or the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. When markets fluctuate and upend the status quo like the proposed tariffs have done, it is more important than ever to embed these in the organisation.
