Just after President Donald Trump’s 10% tariffs on all goods imported into the U.S. from China went into effect on Tuesday, the Ministry of Commerce of the People’s Republic of China made a shocking announcement that accused a well-known American clothing company of willingly committing harmful actions against the country.
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This jaw-dropping announcement could potentially lead to more American companies landing in the same detrimental position since China has already started investigations against other U.S.-based companies.
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Even though this is the first officially reported incident post-Trump tariffs implementation, it raises the question of whether it could signal the beginning of several forms of retaliation from China against the U.S.
American multinational clothing fashion brands Tommy Hilfiger and Calvin Klein Jeans are seen at a shopping mall in Hong Kong.
China’s Ministry of Commerce blacklists PVH from doing business in its country
The Ministry of Commerce of the People’s Republic of China announced that the American company PVH had been placed on the country’s “Unreliable Entity List,” essentially blacklisting it.
PVH Corp. (PVH) is an American clothing company that owns Tommy Hilfiger and Calvin Klein brands.
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According to the Xinhua news agency, China’s Ministry of Commerce released a statement on Tuesday claiming that PVH had “violated normal market trading principles, terminated regular trade with Chinese companies, and adopted discriminatory measures against Chinese companies, thus severely harming their legitimate rights and interests.”
Although the exact implications of this harsh decision have yet to be announced for PVH specifically, it could affect the company’s finances and future investments in the country since it can potentially restrict exports and imports, ban the company from conducting business in China, or lead to fines and other penalties.
As stated in the Provisions on the Unreliable Entity List of China’s Ministry of Commerce, these provisions are stipulated in accordance with China’s Foreign Trade Law, its National Security Law, and other relevant laws to “safeguarding national sovereignty, security and development interests, maintaining fair and free international economic and trade order, protecting the legitimate rights and interests of enterprises, other organizations, and individuals of China.”
The U.S. signs a law to ban imports from China’s Xinjiang region over forced labor concerns
In 2021, Former President Joe Biden signed the Uyghur Forced Labor Prevention Act that banned imports from China’s Xinjiang region because it posed labor concerns that abused human rights. This act aims to prevent forced labor-made goods from entering the U.S.
However, China’s Ministry of Commerce said it opposed the ban because it would harm consumers’ and companies’ interests in the U.S. and China. It also argued that the Chinese government already has laws in place that ban forced labor.
In September of last year, China began an investigation on PVH after the company refused to source cotton from the Xinjiang region, which the Chinese government states violates normal market transactions since it essentially boycotts Xinjiang-sourced cotton.
PVH being placed on China’s Unreliable Entity list could hurt business
Although PVH doesn’t split its brand’s earnings by specific regions, it does differentiate the International entities from the North American ones.
According to PVH’s third-quarter earnings report for 2024, Calvin Klein International’s revenue increased by 1% compared to the year prior, making it more profitable than its North American entity, which decreased by 9%. As for Tommy Hilfiger International, its revenue was flat, although it is more profitable than its North American entity, which declined by 3%.
The overall revenue in PVH’s international businesses was flat compared to the prior year period, which the company attributes partly to its expansion plans in Asia Pacific.
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Because the brands’ international sectors are more profitable than their North American ones, landing on China’s Unreliable Entity List will negatively affect the company’s finances and the reputation of its brands, which have a presence in nearly every Chinese province.
As of Wednesday’s market open, PVH’s stock is down nearly 1.4%. However, the company’s shares have steadily declined over the last few years.
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