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PVH Corp, owner of Calvin Klein and Tommy Hilfiger, has found itself in a position no company wants to be in: at the centre of a tit-for-tat between the world’s two largest economies. Should other American fashion firms be worried?
On 4 February, the Chinese Ministry of Commerce (MOFCOM) announced that PVH and US biotech company Illumina Inc have both been added to its list of “unreliable entities” — companies MOFCOM believes are a threat to China’s national sovereignty, security and development interests. PVH has ostensibly been blacklisted because of its refusal to source cotton from China’s Xinjiang region, where it has been alleged that Uyghurs, a Muslim ethnic minority, are being forced into manual labour (something the Chinese government denies). The US government blocked imports of cotton from Xinjiang in December 2020.
In a statement, MOFCOM claimed PVH Corp had been engaged in “discriminatory measures against Chinese enterprises”, resulting in the “damage” of legitimate rights and interests belonging to Chinese companies. It has not yet clarified what measures will be taken against the American company, if any.
China has not — so far — blacklisted any other US fashion companies with a similar stance on Xinjiang-sourced cotton, begging the question of why PVH has been singled out, and who could be next.
“We are surprised and deeply disappointed to learn of the decision from the Chinese Ministry of Commerce,” said a spokesperson for PVH. “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.”
Why PVH?
PVH is not the first global fashion company to take a stance on sourcing cotton from Xinjiang. H&M faced backlash in China in 2020 after it published a statement online condemning the use of alleged forced labour in the northwestern region; Nike also voiced concerns. Both became the subject of a widespread boycott by consumers. By the end of March 2020, more than 20 H&M stores in China had been closed. Later, the boycott extended to Burberry, Adidas and Converse, among others.
However, this is the first time a fashion company has been added to the ‘unreliable entities’ list. Before this, there were only five US firms on the list, first announced in 2019, none of whom do much business in China (they are largely defence manufacturers). “Even in 2020, there was no official blacklisting [of fashion companies over Xinjiang cotton]; it was mostly consumers boycotting brands such as H&M, Nike and Adidas,” says Lucrezia Seu, founder of Shanghai-based strategy agency Plush Consulting.
“It’s rare to see an American consumer brand — a fashion brand — embroiled in a trade war. It’s typically manufacturing, automotive or electrics,” adds Tom Nixon, co-founder of marketing agency Qumin.
It’s still not clear why PVH has been targeted. Some analysts surmise that it’s simply bad timing: China is retaliating to President Donald Trump’s 10 per cent tariffs on imports from China, which came into effect earlier this month. PVH may simply be serving as a “bargaining chip”, says Sky Canaves, principal analyst of retail and e-commerce at market research company Emarketer.
PVH’s size and presence in China could also be a factor. Generally, analysts agree that it’s rarely the category leader that is targeted in these scenarios. “The company’s brands are well known enough to gain significant attention, yet its operations in China are small enough that any sanctions wouldn’t have major economic ripple effects,” says Canaves. (China generated approximately 6 per cent of PVH’s revenue in 2023, the company said during an earnings call in December 2024.)
The impact on PVH’s China business
A company that has been blacklisted could be subjected to a number of restrictions, such as being prohibited from engaging in China-related import or export activities, and is forbidden from making new investments in the country. Work permits may be cancelled for foreign staff.
In an earnings call in April 2024, PVH CEO Stefan Larsson called China “an important growth engine”. Asia-Pacific has nearly 1,300 Tommy Hilfiger and 2,700 Calvin Klein retail locations (it does not break the region down by country). PVH has a corporate headquarters in Hong Kong and over 10 offices with more than 4,000 associates. Currently, the official Tmall stores from both Calvin Klein and Tommy Hilfiger are operational.
“PVH brands are fairly popular in China. Calvin Klein, in particular, has a very extensive retail footprint across the country,” says Jacques Roizen, managing director China consulting at Digital Luxury Group.
“In case of potential [store] closures, they will have to first clear all product stocks and this may take some time,” Seu says. “It is also possible that some kind of resolution or deal will be reached before we get to this point.” PVH declined to comment further on the potential impact while it continues to seek that resolution.
For now, the brands are keeping a low profile in China. Neither Calvin Klein nor Tommy Hilfiger released Chinese New Year campaigns this year. Both have gone dark on China’s social platforms, with the official accounts of each brand ceasing content since September 2024 on apps like WeChat and Xiaohongshu.
“By halting activity on their China social media platforms, PVH are missing out on vital avenues of communication and engagement with consumers in China,” says Seu. While the loss from going dark is difficult to quantify in real terms, it does “take them out of the online conversation and out of the minds of consumers to some degree”.
While PVH may experience a “backlash”, Roizen thinks it should subside thanks to the strength of the group’s commitment to the Chinese market over the last 20-plus years. Based on the strength of its global business, he thinks its exposure to China is relatively limited. Roizen adds: “The unfortunate situation they are facing today [will likely] slow down their growth in China in the short term, but their long-term relevance in this market is unlikely to be impacted.”
What can other brands do to avoid a similar fate?
The blacklisting of PVH brings the issue of Xinjiang-related production risks into the mainstream again, posing the threat of more brands being targeted. “Other US brands are monitoring the situation carefully to see if any further measures are being taken,” says Seu.
As MOFCOM has not provided details on PVH’s violations or what penalties it will face, Canaves says that raises “a great deal of uncertainty about what compliance is and what is required for fashion brands”.
Brands’ hands are “very much tied” given their need to comply with regulations from both the US and China, says Canaves. Not much can be done if MOFCOM takes the position that refusal to source cotton from Xinjiang is a discriminatory practice. “Arbitrary enforcement has long been a risk of doing business in China,” she points out.
Overall, analysts predict that the blacklisting of PVH will likely be seen as strong enough leverage to combat the tariffs imposed on China, without affecting bigger players in the Chinese market like Nike — for now at least. “American brands are still launching into China irrespective of the risks,” says Nixon, pointing to Alo Yoga as an example, which is preparing to enter China in 2025. “We are not worried about our US clients operating in China as I feel that the control of their supply chains has been pretty well managed.”
For Western fashion groups worried about retaliation, is there a way to play nice? “Establishing positive relationships with officials at both the local and national levels has always been a key part of doing business in the country, and it has certainly taken on greater importance in recent years given the increasingly challenging operating environment faced by foreign companies. That said, relationships only go so far when there are crackdowns or directives from higher authorities,” says Canaves.
To avoid any chance of being targeted, Nixon says it’s best to pick suppliers based on a legitimate procurement that sit within the rules of your company’s ESG. “There has been a lot of pressure from the US government to move away from China, but do not politicise anything. I think someone somewhere, even a whistleblower, must have said something about [PVH’s] changes in sourcing being connected to Xinjiang.” His advice? When making any decisions, “be careful not to use a rationale of something that isn’t a law in China or might contravene the laws in China — whether its sovereignty or concerns about labour”.
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