CHOICES
A publication of AAEA
tariff measures on imports, resulting in retaliatory actions from its trading partners. A central flashpoint was the Section 301 Trade Investigation under the Trade Act of 1974 against China. This investigation triggered multiple rounds of tariffs and retaliatory tariffs, culminating in a 2-year trade conflict during 2018–2019 (Liu et al., 2022). Although tension eased with the Phase One trade agreement in 2020, tariffs on US cotton and Chinese textiles disrupted supply chains and shifted sourcing strategies (Liu, Robinson, and Shurley, 2018; Muhammad, Smith, and MacDonald, 2019a,b; Liu et al., 2022).In 2025, trade tensions resurfaced when the United States imposed a 20% “fentanyl-related” tariff on all Chinese imports under the International Emergency Economic Powers Act of 1977. In response, China imposed a 15% tariff on US cotton, among other agricultural products (USDA-FAS, 2025b). This was followed by the “Liberation Day” or “reciprocal” tariffs, in which the US imposed an additional 34% tariff on top of the fentanyl-related tariff on China. In rapid succession, reciprocal tariffs on Chinese goods were raised to 125%, with the total tariffs added to Chinese goods reaching 145% (a 20% fentanyl surcharge plus a 125% reciprocal tariff). China responded with tariffs of up to 125% on US goods. These measures remained in place until a temporary truce was established. Under the truce, Chinese textile and apparel exports to the US face an additional 30% tariff (a 20% fentanyl surcharge plus a 10% reciprocal tariff), while US cotton exports to China face an additional 25% tariff (15% fentanyl retaliatory tariff plus a 10% reciprocal retaliatory tariff).
Although the Phase One trade agreement included cotton in the temporarily tariff exclusion list to encourage imports, persistent policy uncertainty and renewed trade frictions have prompted the Chinese textile industry to source cotton from alternative suppliers, notably Brazil (Gopinath, 2021; Sabala and Devadoss, 2021; Ridley and Devadoss, 2023). This shift has weakened the US cotton industry’s competitiveness, reduced market share, and increased global competition. This article examines the impact and implications of these tariffs for the US cotton industry so that actions can be taken to mitigate these impacts.
China remains a dominant force in the global cotton market, whose imports are regulated by a tariff-rate quota system linked to government reserve programs (Liu et al., 2022; Liu, Munisamy, Robinson, 2025). Its share of global cotton imports has ranged from 12% to 34% since 2017, reflecting shifts in reserves and quota policies. Despite being the world’s largest cotton producer in 2025 (31.5 million bales), China still imported 5.3 million bales, ranking just behind Bangladesh, Vietnam, and Pakistan.
The United States, historically the top cotton exporter (Figure 1), sent about 87% of its production abroad over the past decade (2016–2025). However, its global market share fell from 39% in 2016–2017 to 26% in 2023 before rebounding slightly to 28% in 2024–2025, due to the onset of the first round of trade dispute with China. Meanwhile, Brazil’s ability to double-crop with other crops has driven substantial growth in its cotton production and exports. The combined pressures of increasing global competition, rising input costs, and drought in the US Southern Plains have led to financial losses for many US cotton producers since 2022 (Liu, 2024a,b).
Brazil, benefiting from lower production costs, higher yields, and expanded infrastructure, surpassed the US as the world’s leading cotton exporter in 2023. Much of this growth is closely tied to China’s strategic diversification away from US cotton, with Chinese investment in Brazilian infrastructure improving logistics, port access, and overall competitiveness (Colussi et al., 2025). In 2024, Chinese investment in Brazil doubled to $4.2 billion, concentrated in logistics and power (CEBC, 2025). From 2007 to 2024, China invested $77.5 billion in Brazil’s energy, transport, and agribusiness sectors, including $2.3 billion directly in agriculture. The larger share targeted ports, railways, energy, and mining (CEBC, 2025). This partnership and investment enable China to secure stable food and feed supplies while allowing Brazil to ship its agricultural products on time, at a lower cost, and with fewer delays.
When China imposed tariffs on US cotton in retaliation for broader US tariffs on Chinese goods in 2018, US cotton became less competitive in the Chinese market. Chinese cotton importers increasingly turned to alternative suppliers, with Brazil emerging as the primary beneficiary (see Ridley and Devadoss, 2026). As a result, Brazil’s cotton exports to China grew rapidly, overtaking the US in 2019. Although US cotton exports rebounded temporarily after the Phase One trade deal in 2020, Brazilian cotton has maintained a strong foothold in the Chinese market. Trade data illustrate these dynamics.
As shown in Figure 2, US cotton exports to China fell sharply during 2018–2019, while Brazil expanded its shares. Although US cotton exports to China reboundedafter the Phase One deal, the US share of China’s cotton imports dropped from 45% in the 2017/18 marketing year to 18% in the 2018/19 marketing year, it was later able to rebound to 30% in 2019, 45% in 2020, 55% in 2021, 53% in 2022, before falling again to 35% in 2023, and 18% in 2024. At the same time, Brazil’s cotton exports to China exceeded US volumes in 2018, 2019, 2023, and 2024. Meanwhile, Chinese yarn imports from other Asian countries, especially Vietnam, surged, providing importers a way to bypass tariffs on US cotton (Muhammad, Smith, and MacDonald, 2019a,b; Muhammad, Smith, and Yu, 2021). These figures highlight China’s ability to diversify away from relying on US cotton for its textile industry.
China remains a critical market for US cotton (Figure 3). China has consistently ranked as the largest or second-largest destination for US cotton exports, often ahead of Vietnam. In 2024, China, Vietnam, Pakistan, and Turkey together accounted for 64% of total US cotton exports, with China alone receiving 30%. Since the onset of the new US administration in early 2025, and in anticipation of another round of trade tensions, China has begun shifting its sourcing of cotton away from the United States. Between January and June 2025, US cotton exports to China declined by 88% compared with the same period a year earlier (Figure 4). The 2024/25 marketing year was one of only two out of the last 17 marketing years with less than 1 million bales of total commitments of US cotton exports to China, resulting in a 17-year low for US cotton export total commitments to China (Robinson, 2025). Much of the resulting market share was redirected to other major importers, with Vietnam increasing imports of US cotton by 124%, Turkey by 85%, Pakistan by 35%, and India by 109%. The observed decline in 2025 US cotton exports to China is much larger than that predicted by early modeling efforts (Liu and Hudson, 2025).
The long-term effect of US cotton has been intensified competition with Brazil, whose lower costs, and higher yields allowed it to expand profitably while US producers face rising costs and declining profitability. While some US exports were redirected to markets such as Vietnam, Bangladesh, and Turkey, the loss of China has been difficult to offset. With Brazil now firmly positioned as China’s primary cotton supplier, the US cotton industry faces greater difficulty regaining market share and must adapt by reducing per unit production costs, adopting new and productive technologies, and expanding into new markets to sustain its role in global cotton trade (Liu, 2024b).
The United States, the world’s largest importer of textiles and clothing, accounted for roughly 15% of global imports from 2017 to 2022. Along with Germany, Japan, the United Kingdom, and China, it makes up an average of 34% of global demand during the same period. China remains the top exporter, averaging 31% of the global textile and clothing exports from 2017 to 2022, followed by Bangladesh, Vietnam, Turkey, and India. However, US–China trade tensions have shifted the global textilesand clothing supply chain, boosting exports fromVietnam, Bangladesh, and Turkey, whose exports grew at annual rates of 7%, 8%, and 5%, respectively, from 2017 to 2022. Meanwhile, the global export value grew at 3% and China grew at 1%.
US cotton textiles and apparel imports are highly concentrated, with seven countries supplying an average of 69% of total imports from 2017 to 2022 (Figure 5). From 2017 to 2022, the total value of US textile and clothing imports increased at an annual rate of 4%. However, since the onset of the US–China trade dispute, both the market share and total value of Chinese textile and apparel exports to the United States have been in decline. Specifically, China’s market share for the US market dropped from 36% in 2017 to 26% in 2022, with an average annual decline of 1% in total value.
This reduction in China’s market share has been largely driven by US tariffs on Chinese textiles and apparel and by the Uyghur Forced Labor Prevention Act, which restricts the US import of textile and apparel products containing Xinjiang cotton. As a result, the United States has actively diversified its supply sources to reduce dependence on Chinese imports by sourcing from other countries, including Bangladesh, Pakistan, Vietnam, Mexico, and India. Mexico also capitalized on this opportunity, significantly increasing its textile and clothing exports to the US At the peak in 2021, US imports of Mexican textiles and clothing reached $7.7 billion, $2.3 billion higher than in 2017.
With the imposition of an additional 30% tariff on Chinese textiles and apparel, including a 20% fentanyl-related surcharge and a 10% reciprocal tariff, the United States has further weakened China’s role in supplying its textile and apparel market. These tariffs imposed by the United States resulted in a nearly 20% year-on-year decline in Chinese textile and apparel exports to the US for the month of May 2026, while exports to the European Union surged by 19.6% year-on-year, and exports to Japan, South Korea, Saudi Arabia, Nigeria, and other markets also experienced varying levels of growth (China Textile Leader, 2025). The imposition of US tariffs on Chinese textiles has also created a ripple effect extending beyond finished goods trade to the upstream cotton market. Specifically, higher tariffs have reduced the competitiveness of Chinese textile exports in the US market, leading to weaker production incentives for Chinese manufacturers. As a result, demand for imported cotton has also declined.
The global cotton supply chain faces another round of uncertainty as reciprocal tariffs extend to other major textile-producing countries, including Vietnam, Bangladesh, Indonesia, India, and Pakistan, in addition to China. This creates both challenges and potential opportunities for certain nations. Although manufacturing is strategically important for national security, reviving the US textile and apparel industry is unlikely given its labor-intensity, together with high labor costs, stringent environmental regulations, and the erosion of theindustry-skilled US workforce. Moreover, the US cottonfutures market has maintained its global-price setting trends despite the trade disputes and a pandemic (Kalli et al., 2026).
Recent bilateral discussions between the United States and Mexico are also an opportunity for Mexico to further consolidate its role within a north–south integrated textile supply chain. Leveraging its geographic proximity, lower labor costs, and strong economic ties with the US, Mexico is well positioned to potentially serve as a hub for its textile and apparel industries. Beyond North America, South Asian countries—including Vietnam, Bangladesh, Indonesia, India, and Pakistan—have large, vertically integrated textile and apparel industries and have steadily increased their role in the cotton and textile trade since the first round of the trade war between the US and China. In addition, the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR)—which has been in effect since 2006 and includes Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States—has significantly shaped US textile and apparel trade flows (Lu, 2023). Furthermore, the Buying American Cotton Act, currently under consideration for legislation, has the potential to add value to US cotton once enacted. The legislation could strengthen the domestic textile industry and promote trade within the Western Hemisphere.
The renewed US–China trade tensions in 2025 have once again underscored the vulnerability of the American cotton industry to geopolitical risks. With China reducing its reliance on US cotton and diversifying its imports toward Brazil and other suppliers, the United States must recognize that rebuilding China as a primary export destination is increasingly unlikely in the short term due to the stickiness of business relations and investments. Instead, US cotton policy should shift toward diversification and regional integration strategies that enhance resilience and mitigate exposure to disruptions in a single market.
Mexico, South Asian, CAFTA-DR countries, and other emerging markets offer realistic opportunities for market expansion and supply chain diversification. A forward-looking cotton trade strategy will be essential for sustaining US cotton’s role in the global economy. Such a strategy should be grounded in diversification, innovation, and regional cooperation. This approach can help safeguard the US cotton industry from recurring trade disruptions. It can also contribute to building a more resilient and integrated textile and apparel supply chain. By gaining a more in-depth understanding of the effects of tariffs, the US cotton industry and the global cotton industry can implement strategies to mitigate the potential impacts of proposed tariffs on cotton and cotton-related products.
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