Yahoo Lifestyle China Targets PVH Corp. as Trade War Tensions Escalate
Updated 4:08 p.m. ET Feb. 4
The Chinese government added PVH Corp. to its list of unreliable entities on Tuesday — hitting the fashion firm with a distinction that until now has been reserved for high-tech and weapons companies.
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Businesses on the list are subject to import and export restrictions or prohibitions, travel restrictions, the cancellation of work permits and more.
PVH said in a statement: “We are surprised and deeply disappointed to learn of the decision from the Chinese Ministry of Commerce. In our 20 years of operating in China and proudly serving our consumers, as a matter of policy, PVH maintains strict compliance with all relevant laws and regulations and operates in line with established industry standards and practices. We will continue our engagement with relevant authorities and look forward to a positive resolution.”
The stakes are high for PVH, which in 2023 generated about 6 percent of its revenues and roughly 15 percent of its earnings before interest and taxes in China.
In a filing with the Securities and Exchange Commission, the company said it didn’t know what restrictions or prohibitions China’s Ministry of Commerce will choose to impose.
As is often the case, the regulatory filing sketched out a kind of worst-case scenario for investors.
“The practical impact of any such restrictions or prohibitions could include our inability to produce goods in China for sale elsewhere, our inability to sell goods on a wholesale or retail basis in China, or our inability to make investments in China,” PVH said in the filing.
“If, as a result of any such measures, it is necessary for us to cease operations in China entirely, it may result in charges related to excess inventory and difficulty collecting trade receivables, among other things.”
On Wall Street, investors felt shaky at first, pushing shares of PVH down as much as 3.5 percent. But the stock found its footing and ended the day down 1 percent to $82.50.
The move puts PVH in the geopolitical spotlight just as a trade war between the U.S. and China heats up.
President Donald Trump, who’s been using trade policy to pressure friends and foes alike, said this weekend that he would impose new 10 percent tariffs on China as well as other levies on Mexico and Canada, citing the need to stop the flow of fentanyl into the U.S. While Mexico and Canada negotiated 30-day extensions, the tariffs against Chinese-made goods went into effect on Tuesday.
China retaliated with an additional 15 percent duty on coal and liquified natural gas from the U.S.
Trump and Chinese President Xi Jinping are expected to talk this week, which could set the tone for negotiations going forward.
Beijing singled out PVH in September, when it said it was investigating the company’s approach to Xinjiang. Officials made a preliminary determination last month that the company had “engaged in improper practices.”
In 2021, PVH started prohibiting licensees from producing goods in Xinjiang and cut ties with factories that used cotton from the region.
That in of itself was not very unusual for the fashion industry, which had been paying close attention to the situation in Xinjiang, where more than a million Uyghurs and other Turkic Muslims are said to be under internment with many forced to work.
More than 80 percent of China’s cotton is made in the region and it is illegal to import goods with Xinjiang cotton into the U.S.
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