Trump's tariff chaos: top Hong Kong bra maker presses on to beat 90-day pause
It has been over a decade since some Hong Kong manufacturers, responding to the mainland's sweeping industrial upgrade and sensing rising US-China trade tensions, moved to set up factories overseas. Being nimble paid off, until President Donald Trump launched his barrage of tariffs on US trading partners as part of his 'America first' economic plan. In the first of a three-part series, the Post focuses on a global underwear maker that moved strategically early, only to navigate new disarray in world trade today.
At a cluster of Hong Kong-owned factories in Thailand last week, more than 3,000 workers raced against time stitching and packing brassieres as quickly as they could to meet a sudden spike in demand from the United States.
Kenneth Wong Kai-chi, managing director of the Top Form Group, said he received a flood of urgent requests from US clients wanting their shipments brought forward.
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They woke him in the middle of the night, asking for their orders to be rushed. Everyone wanted to speak with him directly, but there were too many inquiries and too few solutions.
'Who will pay the extra overtime wages? Who will pay the extra cost of flying in material from China? There are many unanswered questions,' he told the Post.
His four factories in remote Mae Sot, almost 500km (310 miles) from Bangkok and on the border with Myanmar, increased production to churn out 15 million units of bras and intimate wear last year, before US President Donald Trump's array of tariffs created havoc for the company and its customers.
Top Form is one of the world's largest makers of bras, underpants and sports underwear for brands such as Calvin Klein, Victoria's Secret, Wacoal, Warner's, Hanes, Marie Jo, PrimaDonna and others.
It was among the first Hong Kong companies which responded to China's industrial upgrade and US-China trade tensions over a decade ago by opening factories outside the mainland, but the recent surge in orders was unlike anything it had experienced before.
US clients were anxious to avoid hefty tariffs announced by Trump on US trading partners globally since his return to the White House in January, with China hit the hardest.
He has slapped tariffs totalling 145 per cent on Chinese imports so far this year, making for an effective tariff rate of about 156 per cent.
In a tit-for-tat series of actions, Beijing imposed tariffs of 125 per cent on all US goods, on top of earlier duties. According to the White House, China now faces tariffs of up to 245 per cent on certain goods.
When Trump signed an executive order on April 2 imposing tariffs on numerous countries, he accused trading partners of having 'looted, pillaged, raped and plundered' the US through unfair practices.
He fixed a 10 per cent baseline tariff for practically all trading partners, with many facing so-called reciprocal levies as high as 50 per cent.
Then, on April 9, he ordered a 90-day pause on the levies announced only the week before.
That prompted the flurry of calls to Top Form from American clients wanting their underwear orders delivered fast.
Meeting demand would be no easy task, according to Wong.
Trump's tariffs meant uncertainty and trouble ahead for the company and other Hong Kong manufacturers that had diversified production lines away from mainland China to avoid getting tangled in a trade war.
'If you want to sleep through the night, you need to sort out a longer-term solution to ensure that everything, including yarn, has to be sourced outside China,' Wong said.
'The reality is, most raw materials come from China. Even factories in Central America source materials from China. That's why China's raw material suppliers have always had good business, even during Covid-19.' Shake-up for 'China plus one' strategy
When it comes to shopping for underwear, American women are likely to buy bras made outside the US, mainly in China and probably by Top Form.
China was the biggest producer and exporter of bras to the US in terms of volume and value between 2021 and last year, well ahead of the second-largest, Vietnam, according to official US data.
The other top producers were Indonesia, Bangladesh, Sri Lanka, Thailand, Honduras, Cambodia and the Dominican Republic. Together with China and Vietnam, they accounted for 95 per cent of all bras imported into the US last year.
Trump has slapped a 36 per cent tariff on Thailand, 46 per cent on Vietnam, 32 per cent on Indonesia, 37 per cent on Bangladesh, 44 per cent on Sri Lanka and 49 per cent on Cambodia. Honduras and the Dominican Republic were spared.
From at least a decade ago, many Hong Kong companies spread their production bases from the mainland to developing economies such as Thailand, Indonesia, Vietnam and Bangladesh.
They adopted a 'China plus one' strategy, reducing reliance on China as their production base to hedge against the effects of geopolitics and rising costs.
Then Trump arrived and, within the first 100 days of his new term, caused chaos in global trade dynamics with tariffs he hopes will reduce the US trade deficit, assert American interests and correct what he sees as unfair imbalances.
'These manufacturers have gone beyond 'China plus one' to 'China plus N', but still cannot escape tariffs,' said Steve Chuang Tzu-hsiung, chairman of the Federation of Hong Kong Industries, one of the city's largest business chambers.
China shipped goods worth US$439 billion to the US last year, taking second spot behind Mexico, which sent goods worth US$506 billion, according to official US data.
'Obviously, the US knows how much they're buying from China and how deep-seated China's supply chain is, even though many Chinese manufacturers have moved out to developing countries,' Chuang said.
Now those countries have also been hit with tariffs.
'The erratic tariff announcements by Trump have created an environment where it is impossible for anyone to do business,' Chuang said.
'Businesses are unsure if they will receive payment for shipped goods or if clients will retract their orders altogether because nobody knows what the tariff will end up being once the products arrive.' From Mong Kok outfit to global enterprise
Trump's 90-day pause on implementing his tariffs provided temporary breathing space for companies such as Top Form and its US clients.
Co-founded in 1963 by current chairman Eddie Wong Chung-chong, the company has grown from a small outfit in Mong Kok where workers toiled at 20 sewing machines to make bras for export.
Today, it is regarded as a global leader in underwear design and manufacture, with factories on the mainland and in Thailand, Sri Lanka and Indonesia, a workforce of 5,700 and an annual revenue of HK$1.13 billion (US$145.8 million) last year.
Its products are sold at between US$13 and US$100 apiece in the US, in the mid- to high-end segment of the market.
The company is run by the chairman's sons – Kenneth Wong, the group's managing director, group CEO Kevin Wong Kai-chung and Keith Wong Kai-chun who focuses on sustainability issues.
It moved its first factory from Hong Kong to the mainland in 1979.
It was among the first Hong Kong manufacturers to shift some production lines to Southeast Asia between 2007 and 2012, when the mainland began discouraging labour-intensive, energy-consuming and polluting factories in favour of high-technology manufacturing.
Another trigger for garment factories such as Top Form was the mainland's protracted trade tensions with the US and Europe in the mid-2000s over a quota regime for such goods. Factory bustles in remote Thai town
In 2009, Top Form decided to open a factory in Mae Sot, a border town in western Thailand separated from Myanmar by the Moei River, with a large Myanmese population.
A business contact had suggested Mae Sot when the company was looking for a self-contained, self-sufficient community with a stable supply and less competition for labour.
Over the years, it added three more factories, and its workforce grew, supervised by managers from the US, Sri Lanka, Singapore, Bangladesh, India, China and Ethiopia.
Today, Mae Sot is a bustling trading hub popular with Myanmese, who cross the river to buy daily necessities and travel elsewhere in Thailand.
Off the beaten track for tourists, it attracts Myanmese who move with their families to work in factories run mainly by Thai companies.
Top Form is among the very few foreign firms in Mae Sot. Its factories there are the company's core production hub, importing yarn mainly from the mainland to be woven, sewn into bras and packed for delivery, accounting for almost half the group's output.
The recent sharp rise in demand put pressure on the Mae Sot production line, but Kenneth Wong could count on his employees – Myanmese people made up 90 per cent of the workforce and turnover is low.
'This is because many Myanmese migrant workers want to make ends meet and have a stable life,' he said.
Despite the proximity to politically unstable Myanmar, he said the production base had remained peaceful.
'During Covid, I lived in the factory for three months to show support to workers. I could see the sky over a mountain range across the border with warlords' air warfare that looked like fireworks at night,' he said.
Over the past couple of years, the Myanmar side of the border has been exposed as a notorious site for human trafficking and job scam farms. Large posters at the border carry prominent warnings about scams in Chinese, Thai and Burmese.
In March, the area was also affected by the deadly earthquake that struck Myanmar.
Long-time employee Michael Allen Lurer, the manufacturing director, said the cluster experienced shock waves from the 7.7 magnitude earthquake centred more than 800km away.
'When the quake took place, all the workers were evacuated to an open space, and many of them felt dizzy,' said the American who grew up in Hong Kong and studied in Beijing before joining Top Form in 1997 as a graduate trainee.
Everyone returned to work about two hours later, after the structural integrity of the buildings was found to be intact. 'Cautious about US market now'
Kenneth Wong said the ongoing US-China trade war had underlined the importance of spreading manufacturing activity to different jurisdictions.
'Among the considerations for the location of factories are a stable and abundant supply of labour, stable development of a country and the support of key infrastructure such as telecommunication and utilities,' he said.
The group still has three major production facilities on the mainland, one in Longnan, in Jiangxi province, another in Nanhai, Foshan, and the third is in Shenzhen, which together account for over a fifth of the group's capacity this year.
Products from the mainland factories are exported to non-US markets such as Europe, the Middle East, Africa, Australasia and within China.
Despite the confusion and uncertainty resulting from Trump's tariff announcements, the company was pressing ahead with plans for its factories and products.
Group CEO Kevin Wong said that given the volatility in global trade, Top Form was limiting any significant investments in capacity at its Indonesian factory for the next 12 months.
The group aimed to make more use of bonding technology, which adheres fabric for seamless bras that do not need stitching. Another technology on three-dimensional laminated pads can ensure that bras do not lose their shape.
Kevin Wong said the tariff chaos would dampen demand from consumers worried about rising inflation.
'Job security isn't the same as previously, and it is unclear if interest rates are going to be cut,' he said. 'We are cautious about the US market.'
In more recent days, there have been reports of the US reaching out to China to discuss the tariff war, with Beijing responding cautiously.
This development cannot happen soon enough for Rick Helfenbein, former chief of the Washington-based American Apparel & Footwear Association – a national business body representing 1,100 global brands, retailers and producers.
He told the Post that China was 'the master craftsman and had the best raw materials and logistics [for shipping] to the US'.
Noting that China, Vietnam, Bangladesh, India and Indonesia supplied more than three-fifths of apparel to the US but faced tariffs of between 26 per cent and 145 per cent, he said: 'This clearly doesn't work!'
Some US retailers had asked for price concessions, others cancelled orders and some had scrambled to change their sources of supply.
He expected the situation to get more worrying as the year-end fall and holiday seasons approached.
'Eventually retailers will run out of time to properly stock their shelves for the selling season,' he said. 'Right now, the fear level is quite high.'
Helfenbein hoped good sense would prevail and countries would sit down to talk through their differences.
'China is critically important on both the raw material side and the finished goods side. Even a solid diversification plan is often heavily reliant on China inputs,' he said.
'To move a supply chain, it takes three to five years. This is nothing that can happen overnight or at the whim of tariffs.'
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