Tariff Trouble? How Egypt and Turkey Can Stitch Up a Win for US Brands

Mar 187 min read

Trump's tariffs are increasing garment import costs from China, pushing US brands to seek alternative sourcing. It seems likely that Egypt's QIZ program offers duty-free access to the US for garments.

Key Points

Research suggests Trump's tariffs are increasing garment import costs from China, pushing US brands to seek alternative sourcing.
It seems likely that Egypt's QIZ program offers duty-free access to the US for garments meeting specific conditions, including 10.5% value from Israel.
The evidence leans toward Turkey having strong garment production expertise, while Egypt provides competitive labor costs.
A Turkey-Egypt partnership could combine these strengths, potentially reducing costs and maintaining quality.

Impact of Trump's Tariffs on Garment Sourcing

Trump's tariffs, especially on Chinese goods, have raised the cost of garment imports, prompting US brands to explore other sourcing options. This shift is driven by the need to keep prices competitive for consumers, as tariffs can increase prices by significant percentages, affecting consumer spending power.

Egypt and Turkey's Potential Benefits

Egypt benefits from the QIZ program, allowing duty-free garment exports to the US if manufactured in designated zones with at least 10.5% value added from Israel. Turkey, known for its garment production expertise, can partner with Egypt, leveraging Egypt's lower labor costs to reduce overall production expenses. This partnership could help US brands maintain quality while keeping costs down, especially under tariff pressures.

US Import Duty Rates for Garments

US import duty rates for garments vary, typically ranging from 0-20% based on the Harmonized Tariff Schedule (HTS), with higher rates for countries without free trade agreements, like China and Turkey, often around 15% for clothing. Egypt's QIZ program offers duty-free access, significantly reducing costs compared to standard rates.

Survey Note: Detailed Analysis of Trump Tariffs, US Import Duties, and Turkey-Egypt Partnership for US Garment Sourcing

In the current global trade landscape, particularly as of March 6, 2025, US garment brands are navigating significant challenges due to Trump's tariff policies. These tariffs, notably targeting Chinese imports, have reshaped sourcing strategies, pushing brands to explore alternatives like Egypt and Turkey. This note delves into how these countries can benefit from the situation, focusing on a potential partnership that leverages Egypt's duty-free status via the Qualifying Industrial Zone (QIZ) program and Turkey's garment production expertise, while addressing cost, quality, sustainability, and detailed US import duty rates.

Context: Trump's Tariffs and Their Impact

Trump's administration has imposed tariffs on various goods, including garments from China, as part of broader trade policies. Research indicates these tariffs have increased import costs, with studies suggesting price surges of up to 20.6% for apparel under certain scenarios, leading to a loss of consumer spending power estimated at $24 billion. This has prompted US brands to diversify supply chains, often adopting strategies like "China Plus One" to mitigate risks, as detailed in analyses of trade impacts. The ripple effect is felt globally, with factories in Asia, Europe, and Africa bracing for changes, making regions like the Middle East and North Africa more attractive.

US Import Duty Rates for Garments: A Detailed Look

US import duty rates for garments are determined by the Harmonized Tariff Schedule (HTS), with rates varying based on the country of origin and specific product classification. Generally, duties range from 0-38%, with higher rates for countries without free trade agreements. For instance, garments from China face duties around 15%, as noted in a study on US duty rates for clothes imported from China. Turkey, lacking a free trade agreement with the US for garments, also faces standard duties, typically around 15% for clothing, as per general tariff data. Egypt, however, can offer duty-free access through the QIZ program, significantly reducing costs compared to these rates, provided the garments meet specific criteria, including 10.5% value from Israel.

The HTS provides detailed classifications, and for precise rates, businesses must consult tools like the Customs Info Database, which allows searching duty rates for over 170 countries Import Tariffs & Fees Overview and Resources. Effective February 2025, the de minimis rule no longer applies to goods from China or Hong Kong, subjecting them to formal entry processing and duties, further increasing costs.

Egypt's Trade Advantage: The QIZ Program

Egypt does not have a comprehensive free trade agreement with the US, but it participates in the QIZ program, established to foster economic ties with Israel and the US. This program allows garments manufactured in designated industrial zones in Egypt to enter the US duty-free, provided they meet specific criteria: at least 35% of the value must be added in the QIZ, with a minimum of 10.5% coming from Israel. This arrangement has led to a significant boost in Egyptian textile exports, with reports noting a tenfold increase in the first four years of operation Egypt offers the added benefit of duty-free access to the US market. However, this benefit is conditional, requiring integration with Israeli inputs, which adds complexity to sourcing strategies.

Egypt's competitive labor costs further enhance its appeal. While exact figures vary, general estimates place hourly wages in Egypt significantly lower than in developed countries, making it a cost-effective production hub. Specific data indicates the minimum wage for the private sector, where most garment work occurs, is 5,500 EGP per month ($103 USD as of March 2025), with average wages in the sector around this range or slightly higher, based on recent reports. This is particularly attractive for labor-intensive garment production, with reports highlighting Egypt's role as a popular outsourcing destination due to these economics.

Turkey's Role: Garment Production Expertise

Turkey, on the other hand, lacks a free trade agreement with the US for garments, meaning its exports are subject to standard US tariffs, typically around 15% for clothing. However, Turkey is a global leader in textile and garment production, ranking high in exports to the EU and holding a 3.6% share of global textile exports Sustainable textile production: a case study from a woven fabric manufacturing mill in Turkey. Its strengths lie in advanced manufacturing capabilities, with companies adopting international sustainability standards like GRS and OEKO-TEX, positioning it as a hub for high-quality, eco-friendly production Excellence in sustainability gives Turkey clothing sector cutting edge in global markets. Turkey's labor costs are higher than Egypt's but lower than Western countries, ($632 USD as of March 2025).

The Partnership: Combining Strengths for US Brands

The proposed Turkey-Egypt partnership aims to merge these advantages, creating a synergistic model for US garment sourcing. Turkish companies can provide design, technology, and management expertise, while Egyptian firms leverage their lower labor costs for manufacturing. To qualify for QIZ benefits, the partnership would need to ensure that at least 10.5% of the value added comes from Israel, potentially through sourcing materials or components from Israeli manufacturers, as seen in existing joint ventures. This integration, while complex, is feasible given historical collaborations, such as Turkish and Israeli manufacturers setting up plants in Jordan and Egypt.

This model could significantly reduce costs for US brands. By avoiding US tariffs through the QIZ program and benefiting from Egypt's labor costs, brands can maintain competitive pricing. Quality is safeguarded by Turkey's expertise, with reports noting Turkey's focus on innovation and high standards How Sustainability Drives the Future of Turkish Apparel Production. An unexpected detail is the potential for Turkish investment in Egypt, such as the Eroglu Garment project in the Suez Canal Economic Zone, with investments worth $40 million, creating jobs and boosting export capacity Turkey establishes ready-made clothes project in Egypt with investments worth US$40 million.

Sustainability: A Growing Imperative

Sustainability is increasingly critical for US brands, and both Turkey and Egypt are advancing in this area. Turkey's garment sector is investing in eco-friendly dyes, water treatment, and energy reduction, aligning with EU and US green policies. Egypt, meanwhile, is seeing a rise in recycling and upcycling, driven by economic needs, reducing waste and creating jobs. Producing closer to the US market, particularly from Egypt, can lower transportation emissions, enhancing the sustainability profile of the partnership.

Challenges and Considerations

The main challenge lies in integrating Israel's role to meet QIZ requirements, given geopolitical and logistical complexities. Additionally, while labor costs in Egypt are low, ensuring compliance with labor standards and sustainability practices requires careful management. The partnership's success depends on coordination between Turkish, Egyptian, and potentially Israeli stakeholders, which may involve additional costs and time.

Conclusion

For US brands, the Turkey-Egypt partnership offers a strategic response to Trump's tariffs, combining cost savings, quality assurance, and sustainability. By leveraging Egypt's QIZ program and Turkey's expertise, brands can maintain competitive pricing without compromising on quality, while aligning with consumer demands for eco-friendly practices. This approach, while complex, presents a viable path forward in a challenging trade environment.

Country	Trade Advantage	Labor Costs	Sustainability Efforts
Egypt	QIZ program for duty-free US access, requiring 10.5% Israeli value	Competitive, lower than many peers, around $103 USD/month minimum	Growing recycling, upcycling movements
Turkey	No US FTA, subject to tariffs, around 15% duty	Higher than Egypt, lower than West, around $632 USD/month average	Advanced, with GRS, OEKO-TEX standards

This table summarizes the key attributes, highlighting how each country contributes to the partnership's potential.

Key Citations

You can find more about Istanbul Tekstil's partnership with Egyptian factories from here: https://www.istanbultekstil.com.tr/faq-contact-us