The mid-May high-level Sino-US face-to-face meeting comes at a time when China's textile industry is experiencing its most typical cost-demand double squeeze in nearly three years. Crude oil prices, driven by geopolitical events, remain elevated, directly raising costs for basic raw materials like polyester filament and chemical fibers. Meanwhile, terminal orders are constrained by high combined tariffs from Section 301 and additional levies, compressing corporate profit margins to the limit. Industry operating rates remain low, with the market stuck in a stalemate of 'rising prices without orders, falling prices with losses.'
Energy and Tariffs: How Two Variables Transmit Through the Textile Chain
The immediate trigger for current cost pressures comes from the energy side. Since the beginning of the year, the Middle East situation has escalated twice—following a U.S. strike on Venezuela, joint U.S.-Israeli action against Iran led to a temporary blockade of the Strait of Hormuz, causing a sharp spike in international oil prices. In the textile supply chain, polyester filament and chemical fibers use petroleum as a direct upstream raw material; oil price hikes quickly squeeze the profits of midstream processors through cost transmission. Public data shows that the average gross margin of the chemical fiber industry in Q1 2026 narrowed by about 3 to 5 percentage points year-on-year.
On the tariff front, the situation is complex, with policy reversals and overlapping enforcement. In early May, the U.S. Court of International Trade ruled that the Trump administration's 10% global import tariff was illegal, marking the second judicial setback for this policy after the Supreme Court's rejection in February. However, Section 301 tariffs on Chinese textiles have not loosened correspondingly, and combined with previously imposed provisional tariffs, the overall rate for Chinese textile exports to the U.S. remains at a historical high. This means that even if export companies see judicial positives, actual customs clearance costs have not significantly decreased.
The Meeting Window: Short-Term Benefits vs. Long-Term Structural Challenges
The timing of this high-level meeting carries strong directional signals. On May 6, Iran's foreign minister had just concluded a visit to China, followed immediately by Trump's scheduled trip, indicating overlapping interests in managing the Middle East situation. U.S. domestic polls show 66% of the public oppose military action against Iran, and inflation pressure from high oil prices has become a key constraint for the midterm elections. If China and the U.S. can reach an understanding on de-escalation in the Middle East, international oil prices could return to a reasonable range, directly easing cost pressures on chemical fiber raw materials.
Tariff issues are another core focus. Growing resistance from U.S. businesses and consumers to high tariffs, combined with consecutive judicial setbacks, gives the Trump administration practical motivation to adjust China tariffs. Industry expectations are that if the meeting can promote consensus on trade issues, it will likely involve tariff reductions or market access improvements. If tariffs on Chinese textile exports to the U.S. are lowered or partial exemptions granted, it would directly reduce export costs, release order vitality, and boost segments like apparel and home textiles.
However, it must be recognized that China's textile industry has significantly reduced its dependence on a single market. After nearly five years of trade friction, production capacity has accelerated relocation to Southeast Asia and South Asia, while the rise of cross-border e-commerce has diversified export routes. Even if tariffs see short-term relaxation, rebuilding supply chain trust with the U.S. will take time. Long-term, the key lies in consolidating emerging market channels and enhancing own-brand premium capabilities.