Retail Unwrapped from The Robin Report

What Does Hong Kong’s Quiet Comeback Mean?

Ross O'Brien — Tue, 20 Jan 2026 05:01:00 +0000

Last month, Prada reopened its flagship boutique in Hong Kong in Alexandra House in Central. This is after years of downsizing and store closures, both for the Italian luxury giant and Hong Kong retailers overall. Prada’s relaunched boutique is now its largest in the region—reportedly some 14,000 square feet over three floors.

You’d think this roaring comeback would have been accompanied by tremendous fanfare. Yet, except for a modest street campaign, Prada’s relaunch was a discrete affair—much like the rest of Hong Kong’s quiet retail bounce back in 2025.

Prada’s supersized return to its iconic post, however, might be an early signal of the luxury market recovery here in China—as well as a portent of how physical high-end retail is changing.

Hong Kong retail closed on a high note last year. Retail sales rose steadily over the year, and, $4.3bn in November were up 6.5 percent over 2024. Property transactions—always a bellwether of Hong Kong consumer confidence–soared to a four-year peak, up 15 percent over 2024, capping a nearly year-long sales streak.

While domestic consumer confidence is important to the Hong Kong retail scene, it is tourism that is seen as a stronger driver. Here, too, 2025 was a banner year: visitor arrivals were up 12 percent to nearly 50 million, three-quarters of whom were from mainland China.

But Hong Kong, like Prada, has not been making as much noise about these gains after working through years of sluggish post-pandemic recovery. This is partially due to timing. While economic numbers are robust, a number of recent somber events have dampened the mood here. These have included the horrific Tai Po housing estate fires, which claimed over 160 lives, curtailed many festivities over the holiday season, including the cancellation of the city’s annual New Year’s fireworks display.

All of this might be informing Prada’s low-key reopening, even as they prepare to open another new 8,000 square foot store in a high-concept immersive art, entertainment and luxury retail space over on Kowloon. Both these are experiential destinations, brimming with Instagrammable nooks and high touch concierge services, suggesting that dwell time and social media amplification are becoming as important metrics as ATV.

Prada, like retailers across Hong Kong, is finally enjoying the steady retail recovery with quiet confidence in the luxury market in an otherwise turbulent global economy, particularly for a city sitting on the fault line of a persistent U.S.-China trade rift.

Why We Can’t Quit China

Ross O'Brien — Thu, 15 Jan 2026 05:01:00 +0000

American protectionists had much to celebrate this holiday season. Recent topline trade data suggests that U.S. tariffs on Chinese goods have caused American importers to purchase much less from China than they did before Trump’s second administration launched its global tariff agenda on ‘Liberation Day’ in April, with a particular focus on turning up the heat on an already raging trade war with China. In turn, however, they have yielded little material benefit for U.S. consumers, neither in terms of increasing consumer affordability, redirecting investment towards U.S. innovation and productivity, nor—perhaps the federal government’s most pressing goal—to stop China’s increasing dominance of the world’s supply chains.

In fact, in most cases, tariffs and investment restrictions aimed at China have accelerated the opposite effect, and given China many additional months to solidify its position as everyone else’s most important trading partner. U.S. manufacturing has not significantly replaced Chinese goods for American consumers. The restrictions have caused a diversion of imports to elsewhere from countries in turn, increasingly reliant on Chinese components and machines to produce them.

Will 2026 see a continuation of the volatile tariff swings of 2025 and will the U.S. stop importing from. China? And the answer is: It is unlikely that tariffs will stabilize into something more predictable—not free trade, but a stable managed relationship where some doors close while others remain strategically open, especially when it comes to a pragmatic relationship with China.

Down, But Not Out

American imports from China have indeed plummeted compared to 2024 levels, dropping 29 percent in November alone. The Trump administration’s effective tariff rate on Chinese goods has yo-yoed over the course of the year, and has added more than 40 percent to the cost of those imports, squeezing Chinese manufacturers and forcing American retailers to absorb higher costs or pass them to consumers.

Tariffs may have succeeded in reducing American purchases from China, but they have both failed to reduce overall American trade deficits and have accelerated China’s global market expansion at America’s expense. Chinese exports to Southeast Asia surged nearly 14 percent year-over-year in 2025 (a region that has been a key supplier of consumer goods to America). Chinese exports to Africa jumped 27 percent, and nearly 9 percent to Europe—gains that more than compensated for lost U.S. sales and have allowed China’s global trade surplus to top $1 trillion trade surplus in the first eleven months of 2025—the highest ever recorded.

The tariff policy did achieve what it technically set out to do. Average effective tariff rates on Chinese goods reached 39.2 to 47.5 percent by mid-year. U.S. Census Bureau data reveals American imports from China were $242 billion through September 2025, compared to $439 billion in 2024—roughly a 45 percent decline. Consumer confidence in holiday spending suddenly crashed: Gallup’s November consumer spending poll found gift purchase estimates dropped 23 percent from the month before, to $778, which represents the largest single-month decline the research house has ever recorded, steeper even than during the 2008 financial crisis.

Despite this, the overall U.S.-China trade deficit has not moved much: Through September 2025, the bilateral merchandise trade deficit was $160.5 billion, and is estimated to be around $214 billion for the full year. 2024’s deficit, of $295.5 billion, was higher, but China’s still clearly maintained the upper hand, and American businesses and consumers have paid the price.

Neither did Uncle Sam’s coffers overflow with tariff receipts. The federal government collected over $101 billion in tariff revenue between January and August 2025, but some studies suggested that as much as 25 percent in addition has been uncollected because importers changed purchasing patterns to avoid tariffs.

This reveals the core flaw in tariff-based trade strategy: Global commerce is being redistributed, not rebalanced. Chinese goods never stopped flowing to global markets; they simply took detours around American tariff walls. This strategy has thinned margins for Chinese manufacturers, but it has kept China’s well-oiled export machine running smoothly, and increased its global lead over American producers in the process. Countries once bought American goods now purchase Chinese alternatives at significant discounts.

The U.S. government seems to have shot itself in the foot in its showdown with China. Although America’s door is completely shut to China, signs of selective re-engagement are emerging. Biotech is one such area, and could be a harbinger of how U.S. retail and consumer goods more broadly could work back to a pragmatic trade relationship with the world’s biggest supplier.

China’s Medical Exemption

Despite the U.S. government’s relentless efforts to decouple its economy from China, and the particular success it has enjoyed in chilling cross-border trade and investment in AI, semiconductors and other strategic high-tech, American policy toward China is decidedly not unidirectional. American banks and businesses have found that some avenues are still open to them, particularly in market segments—like rare earth minerals or pharmaceuticals—where American industry has no other choice but to deal with China.

Pharmaceuticals are a particularly thorny area, in part because, like digital technologies, they are seen as strategically sensitive. The U.S. BioSecure Act was first muted in January 2024 by bipartisan lawmakers prohibiting federal agencies and contractors from procuring biotechnology equipment or services from “companies of concern”—primarily state-linked Chinese firms. But to date, it has not been passed, although provisions were incorporated into the National Defense Authorization Act enacted in December 2025.

“There’s a hard firewall between Silicon Valley and China when it comes to AI or semiconductors, but in biotech we’re still able to receive U.S. investment,” says George Lin, Chief Strategy Officer at Hua Medicine, a Hong Kong-listed pharmaceutical company focused on diabetes medications, financed by Arch Ventures and Venrock (the Rockefeller family’s venture capital arm). Hua continues to thrive—it hopes to soon launch a Type 2 diabetes treatment in the U.S., which has seen radical remission rates in its Chinese clinical trials. Lin sees his industry’s challenge for American manufacturers, retailers and consumers that lies at the heart of America’s anti-China stance, and the road back towards a more normal trading relationship. “The fact that attempts like the Bio Secure Act haven’t succeeded shows there’s an understanding—even in Washington—that cutting off this exchange would hurt innovation and patient care in the U.S., and globally.”

China has built extraordinary infrastructure for drug development, of both high quality and low cost. This makes decoupling economically irrational for American pharmaceutical companies, as it would simply slow global drug development without accelerating American innovation. This has led to a controlled re-engagement—and this could foreshadow how consumer retail supply chains could also, slowly, normalize.

The Long Road Back to Normal-ish

The future likely involves sustained differentiation rather than across-the-board decoupling. Sectors deemed strategic for military, intelligence, or advanced manufacturing purposes will face intensifying restrictions: semiconductors, advanced computing, synthetic biology applications, and quantum computing. Tariffs on standard consumer goods and manufacturing will persist, though probably at somewhat lower rates following the October 2025 agreement reducing reciprocal rates from 145 percent to 10 percent. But sectors offering benign applications with genuine human welfare benefits and where American independence proves economically irrational—pharmaceuticals, medical devices, basic research—will continue operating across geopolitical boundaries.

Will 2026 see a continuation of the volatile tariff swings of 2025? It is unlikely that they may eventually stabilize into something more predictable—not free trade, but a stable managed relationship where some doors close while others remain strategically open. China’s record $1 trillion trade surplus will underpin the country’s continued resolve to compete, and it is very unlikely that the rest of the world will have the manufacturing capacity or the political will to converge on protectionist policies on par with America’s.

For U.S. consumers, there will be no immediate relief, as the world collectively fails to quit China. But as the ongoing cross-border collaboration in the pharma sector reveals, U.S. policymakers are capable of balancing national strategy with commercial realities. As economic pressures mount for the average American consumer, perhaps the government will begin to bring the same pragmatism they show in biotech into its broader tariff strategy.

Janice and Jason Wang Are Creating the AI RetailTech Future

Ross O'Brien — Tue, 05 Aug 2025 04:01:00 +0000

What does it take to be a pioneer in uncharted retail industry waters? The global fashion industry is driven by innovation and creativity, but defined by more tangible assets: fabric, form, warehouses and stores. Technology has played a central role in production, less so in the front office. Alvanon, a Hong Kong-based fashion tech firm co-founded by siblings Janice and Jason Wang, has strived to harness data and leverage technology over the past 25 years. As forerunners, they have led the way to maximize the impact of innovation while minimizing the friction and constraints across solutions that impact every stage of the fashion supply chain.

AI-Relevant High Tech

The Wangs focused on a core problem in the industry, responsible for customer frustration and a cascade of returns and a frustration for retailers: sizing. Alvanon has worked with hundreds of the world’s leading brands, from Chanel, Walmart, Lululemon, and Gap, to Target, Stitch Fix, Polo Ralph Lauren, and more to help them optimize the ways they approach fit and sizing to design processes and reduce waste and inventory costs.

This is much more complex than it sounds and has advanced exponentially with AI. The fashiontech innovator has been enhancing its solutions with artificial intelligence (AI) to infuse further precision and accuracy in the fit and design process and turn product development cycles into perpetual learning and innovation engines.

Founded in 2001 in Hong Kong, Alvanon currently has headquarters in New York, London, Germany, Shanghai, Shen Zhen, and Australia. Its global team of 200 creates data-driven physical and digital sizing and fit tools and provides consulting services to help clients address challenges in apparel development, production, and retail.

“The supply chain for mass-produced garments is a very lengthy one—we can predict weather better than we can predict what fashions will sell.” Janice Wang

The Wang Way

Founders (and siblings) Janice and Jason Wong grew up in a Hong Kong garment manufacturing family, where they developed a holistic understanding of the apparel industry, from the rigor of precise design, through the complex logistics of globally dispersed supply chains, to the ever-evolving expectations of consumers. Janice is CEO and Jason is COO; together they guide Alvanon with a pragmatic understanding of their industry’s challenges and a desire to balance innovation with execution.

Alvanon’s strategic outlook is holistic and begins with an essential understanding of the critical importance of data, and how it flows between each link of the apparel value chain. “The supply chain for mass-produced garments is a very lengthy one—we can predict weather better than we can predict what fashions will sell,” observes Janice. “The 18 months it typically takes to bring a piece from concept to floor is typical for producers of evergreen items like basic T-shirts or sweatpants, but for a hot neon pink shirt, trendiness cannot be predicted that far out,” she explains. Janice believes most processes are currently insufficiently agile to fulfil fast-changing consumer trends and tastes. “And then when you factor in sizes across a global consumer population, the problem becomes even more complex!”

The Fit-Tech Revolution

The Wangs understood that sizing was a key unlock to brand success. Alvanon’s journey began with a prescient realization: Precise sizing is not only key to consumer satisfaction, but also the fundamental underpinning of the profitability of every apparel brand. Janice explains, “We’ve built a ‘fit standard’—a series of mannequins that work as an industrial benchmark, covering the global spectrum of human bodies.” Alvanon has created a consistent sizing and fit language, AlvaForms. Their innovation is a poster child for the practical application of AI technologies. These physical and digital fit models are crafted based on extensive anthropometric data from millions of body scans and are designed to reflect a broad spectrum of human body shapes and sizes.

AlvaForms are used in product development, grading, and quality control processes by hundreds of apparel brands and manufacturers and are integrated within digital design workflows, accessible via Alvanon’s Body Platform (ABP), a software-as-a-service solution it launched nearly a decade ago. The ABP enables apparel designers, manufacturers, and retailers to create consistent sizing for prototyping, sampling, and fit validation, which in turn allows tighter coordination across globally dispersed supply chains. By converting vast amounts of anatomical data into granular and precise fit categories, Alvanon helps global brands improve design accuracy and, in return, reduce expensive product returns.

AI Transformation

The Alvanon Body Platform was a breakthrough for stakeholders—whether high-fashion couturiers or fast-fashion manufacturers—to work with one universal, trusted fit standard. “As 3D design gained more industry traction, ABP allowed 3D design software users to use virtual AlvaForm that was exactly the same as their physical AlvaForm,” says Janice.

As visionaries, Alvanon is looking to harness AI to ride a further wave of fashion tech innovation. Janice observes that as brands continue to build ever-massive libraries of digital assets, “there needs to be some discipline, and they need search capabilities. Alvanon’s AI journey was built on top of 20 years of building libraries of bodies, examining outliers, categorizing ethnicities and points of measurements in 3D.” AI now forms an integral component of Alvanon’s sizing intelligence ecosystem, integrating all the data and analytical processes the company has generated along that journey. AI tools have been layered onto this foundation to address and reduce the challenges created by the data silos that emerge within the legacy systems of fashion companies. As Janice describes: “Silos emerge as more humans try to do their jobs with limited amounts of data or try to draw holistic insight from the wrong datasets.”

Alvanon’s AI-driven system enables faster, more accurate demand forecasting and fit analyses, in part because it is purpose-built to cut through these silos in an increasingly digitally native fashion world. Eric Lee, Alvanon’s Executive Director for the Americas, explains, “The truth is, we know what an effective sizing system looks like — it really hasn’t changed that much since Alvanon started 25 years ago.” That said, “Most sizing tools on ecommerce sites are built to drive conversion, not to capture accurate shopper body and shape data. As a result, brands are often left with an incomplete—or misleading—picture of their customers’ bodies, which limits their ability to design better-fitting garments.”

Alvanon is working to deepen AI integration to build end-to-end sizing solutions that continuously adapt and learn from real-time data across the fashion supply chain. The company envisions AI not just as a fit and demand prediction tool, but as an enabler of data-driven collaboration between designers, manufacturers, and retailers to break down existing data silos and achieve a single sizing standard across digital and physical product workflows.

Transformative Agentive AI Platform

The transformation Alvanon is working to achieve is being accelerated by AI’s own iterative journey, as the technology moves beyond basic generative functions (creating images or designs based on prompts) towards agentive AI, in which models can act autonomously to optimize and manage workflows. Jason highlights this pivotal transition: “AI agents are increasingly more interesting for the apparel industry. AI is all about machine learning; more and better ‘ground truth’ data you can feed the machine, the better.” Agentive capability allows AI to make decisions proactively and improve operational efficiency, rather than requiring constant human input. Such autonomous intelligence is particularly relevant for the complex and multifaceted apparel industry, where multiple stakeholders need to collaborate on fit, sizing, and design in fast-moving environments.

Lee explains BodyAI was developed as “a data translation tool that helps apparel teams interpret ecommerce feedback and other data sources to drive smarter sizing and design choices.” Lee believes this will help brands “create smarter products, better fit, and loyal customers who keep coming back.”

BodyAI represents a key step in moving toward autonomous intelligence: “AI can enhance many tasks today in the apparel industry, but only if there is enough reliable data and the systems are in place,” says Jason, “ I can see a future where AI is helping in real time to determine the exact sizing allocation going into each store, and from that, determining the production lot. The key is to solve the issue of reliable consumer data.”

BodyAI’s suite of services uses AI to capture and create avatars of consumers and provide each with sizing and fit advice alongside other AI tools that are in the market today. Other tools on the market, like Google’s Doppl app, offer a virtual representation of how clothes might look, but there is a critical difference between visual try-on and accurate fit. “Virtual try-ons make everyone look good, but if the digital asset doesn’t match the physical garment, customers will be disappointed,” says Jason Wang. That’s where BodyAI comes in; not to replace existing tools, but to sit alongside them, ensuring that the visual experience is grounded in physical reality. BodyAI acts as a “bridge between the ecommerce team and the product teams,” enabling both commercial and product stakeholders to extract greater value from the data already in their possession.

From AI to Beyond

Looking forward, Alvanon is significantly expanding its investments in AI and data-driven solutions. The company envisions a future where fashion is shaped by entities capable of converting complexity into clarity and speed at scale. Beyond delivering reliable sizing and fit, Alvanon seeks to harness consumer trust to help fashion evolve into an industry where digital precision, sustainability, and customer satisfaction are no longer trade-offs but synergistic goals. As Janice puts it, “The issue is not just about getting the right size, but building systems that can adapt, learn, and serve both the industry and the consumer—faster, smarter, better.” In this AI-powered era, Alvanon’s continued focus on innovation, collaboration, and human-centric design is its foundation to remain indispensable in the ever-evolving fashion landscape.

Good News For Retailers: Malaysia Is the Happiest Asian Country

Ross O'Brien — Mon, 07 Jul 2025 04:01:00 +0000

For decades, global brands have been attracted to Asia’s consumer markets for their high growth and aspirational buying behaviors. Specifically, consumer markets in emerging Asian economies with younger-skewing demographics and rising incomes fueled by exports and innovation have been the main objects of retailers’ affection. Mature markets like Japan and Korea are rich and sophisticated, and for that reason still serve as regional taste-making platforms, upon which flagship stores can be perched. That said, their aging, shrinking economies increasingly deter investment that can be better spent expanding retail presence and digital channels in South and Southeast Asia with higher potential for growth.

Malaysian consumers are remarkably optimistic in these gloomy times—even by Asian standards. Can it last long enough for global brands to make use of it?

The Year of Living Confidently in Malaysia

Unsurprisingly, the May 2025 Global Consumer Confidence report from market research house IPOS saw Asian countries take up the top three slots, with Korea and Japan lagging near the bottom. What was surprising, however, the country that came in first with the biggest gains globally over last year is Malaysia. A small, middle-income country of 35 million which also sits in the middle of its Southeast Asian peers, Malaysia is less populous than many (Indonesia’s is three times larger) and far less rich than others (Singapore’s GDP per capita is nearly seven times greater). Yet more than either of those markets (or indeed any market in the world) Malaysia’s consumers are bullish, and this creates an interesting market for global brands.

The IPOS Confidence Index surveys consumers in 30 countries, aggregates responses to ten questions around such issues as their current financial position, job security, and future expectations, and ranks them on a scale of 1 to 100. Scores over 50 are considered positive. Malaysia’s top score of 59 represents a jump of 12 places from the previous quarter and an improvement of over 7 points from April’s scores, while scores dropped for nearly two-thirds of other countries.

Johnny Sawyer, Senior Research Manager at Ipsos, believes three key areas drove Malaysia’s bounce: “increased comfort with major purchases, more comfort with household purchases, and confidence in future investments.” He adds that Malaysians’ sense that the country is on the right track has also surged: “69 percent of Malaysians now believe their country is on the right track, up from 51 percent a year ago — so it’s not just the economy.”

Being Happy

Malaysia’s optimism stands out at a time when trade wars, lingering inflation and geopolitical tensions are depressing sentiment nearly everywhere else. Sawyer posits that Malaysian consumers are “less worried about trade wars and tariff disputes.” This is interesting, given the value of Malaysian exports is equivalent to 68 percent of GDP, and in other trade-dependent Asian countries like South Korea, there is a direct correlation between export growth and domestic retail sales. But only 11 percent of those exports make it to the U.S.—the lowest in Asia—giving Malaysia some Trump tariff insulation.

Malaysian happiness appears infectious: Like many other Southeast Asian markets, it has leveraged good sunshine, melting pot menus and relatively inexpensive price points to become a successful hub for tourism, retirement and long-term residence. By December 2024, over 58,400 foreigners (largely from China and other Asian countries) were approved for the country’s “Malaysia My Second Home” residence program, which has attracted roughly $100 million in fixed deposits and real estate investments. Malaysia’s decades-long “Truly Asia” tourism campaign, rooted in the belief that its one-stop-shop buffet of cultural experiences would be a draw, has largely been a success and provided competitive advantages for local brands and retailers. A modern, funky and beachy destination with plenty of halal-certified hotels and restaurants is a great draw for tourism from the Muslim world. Some 4.82 million tourists from Muslim-majority countries in the Middle East, Southeast Asia and elsewhere spent 15 billion Ringgit (US$3.5 billion) on their visits to Malaysia last year. The country has been rolling out halal-certified hotels, cruise line services to Saudi Arabia, and other amenities in order to attract a growing share of the $266 billion Halal and tourism industry.

Retail Nostalgia

A recent day trip to Ipoh reveals the multi-cultural underpinnings of the Malaysian experience, and Chinese cultural threads run deep ever since Chinese miners flooded in during a tin boom in the late 19^th century. Ipoh’s Chinese heritage, in turn, has established global roots. Oscar-winning movie star Michelle Yeo was born in Ipoh, and the father of Chinese nationalism Sun Yat Sen made Ipoh one of his stops in his global tour of the Chinese diaspora, gathering support and funds for the cause.

A sort of hipster appreciation has seeped into the city’s old market district, where chic coffee shops and boutiques now inhabit the shells of former Chinese apothecaries and pawnshops. The vibe is exposed brick walls and remnants of the 1950s stenciled window signs for nostalgia. This is largely to cater to local tastes; Malaysians, like Hong Kongers, have an appreciation for the ironic, nostalgic post-World War II home goods and 1960’s fashion which is reflected the fusion of Asian tradition and western modernism in fairly equal measures. “Local Ipoh people are happy knowing that the restaurants and the shops that they grew up are still around,” says a long-term resident who runs a charming marble table-strewn café that’s been in business since 1931. Traditional fare and local color also appeal to tourists seeking the “Truly Asia Experience.” One can observe small knots of tourists snapping photos of weather-faded shophouses shaded by Banyan trees in Ipoh’s iconic old town. “Muslim-friendly—no pork or lard” is a sign that hangs in the windows of many of the city’s Chinese restaurants.

Older, traditional Malaysian brands—lime sweets, biscuits, curry pastes and other traditional snacks and supplements—beckon visitors in brightly colored displays stacked high, revealing a multicultural consumer culture with well-established relationships with brands that run generations deep. This reflects a consumer culture that is ‘fluent’ in the language of brands and highly receptive to traditional (even old-school) FMCG marketing campaigns. This eases market entry for international players, and despite the heaps of brand goodwill banked by deeply entrenched local brands, Malaysian consumers have long been comfortable substituting foreign favorites. For several years, market watchers have reported on the significant gains made by foreign retailers in key FMCG segments.

Emerging Globalism

Malaysian designers and brands (like Hong Kong, Singapore and other ‘east-meets-west’ consumer economies) are working with a rich mélange of cultural source materials. Not every one of Ipoh’s shops runs on local nostalgia. “Younger Malaysians are really getting into game nights,” says a sales associate at a game emporium specializing in American and British board games, noting the most popular game these days is (perhaps a bit worryingly) Secret Hitler. For some retailers, however, Malaysia’s laid-back local charms have their limits. “Business has been bad for the last few months, but that’s because the city has not made any progress fixing this street in three months,” says a shopkeeper who runs a ceramics and housewares store on Market Street, an historic footpath that was dug up earlier this year in anticipation of a heritage facelift that is apparently taking a laid-back time arriving.

Local Politics

Malaysia’s friendly disposition may have other limitations. While its tourism and retail industries have taken great pains to be welcoming, the country has its share of problematic domestic and international politics that work against this inclusive posture. The government’s longstanding pro-Palestinian stance has morphed into increasingly vocal defense and support for terror organizations like Hamas, and now Iran, which more than once has caused Facebook and Instagram to remove posts made by Prime Minister Anwar Ibrahim. In May, the Prime Minister made his second state visit to Russia, courting favor with Putin even as the U.N. released a report blaming Russia for downing a Malaysia Airlines flight over Ukraine in 2014.

Domestically, the government is earning a reputation for cracking down on digital dissent. TikTok’s biannual transparency report noted that Malaysia made more requests to take down posts its citizens made than any other country in the world: 1,862, nearly three times as many as second-place Australia. A new and very strict mobile phone personal data registration law has many concerned that its primary purpose is digital surveillance. While not as draconian as Vietnam’s internet clampdown (as we’ve recently reported) Malaysia’s growing efforts to control and track communications could have a similarly dampening effect on its digital economy.

Opportunity Knocks

Provincialism and local politics could tarnish Malaysia’s shiny happy reputation, but they should not give global brands pause when considering Malaysia as an expansion market. Most recent data continues to support the Malaysian market thesis: retail sales growth in the first quarter of 2025 averaged over 6 percent.

Over the longer term, however, global brands do need to be cautious of a growth slowdown, as concerns mount that Malaysia is descending into a middle-income trap. Wage growth has surged 70 percent over the last decade while labor participation only grew 7 percent, suggesting Malaysia’s time as a cost-effective producer of export goods is nearing its end. Labor productivity growth, at 2.1 percent, outpaces the rich world (the 2024 average was 1.4 percent) but is less than half of the roughly 5 percent that China and Vietnam maintained.

Without significant investment in the skills to support higher-value manufacturing and knowledge-intensive industries, Malaysia could have trouble clearing this hurdle. Unsurprisingly, this is an action plan underlined in red on the government’s roadmap, but there are concerns that this might take longer than the average worker would like. “I have been given more responsibility, but not much more pay; I am just not getting ahead,” says an Ipoh-based project manager for a semiconductor firm, who says local operations are more concerned with containing costs than investing in operations. He’s working on his Mandarin and thinking about taking his skills to Taiwan.

July could see a significant dip in Malaysia’s world-beating consumer optimism, explains Ipsos’ Sawyer. Malaysians may not have linked the threat of U.S. tariffs to their financial well-being, but Trump’s proposed 24 percent increase on July 8 (if the deadline sticks) could shock them into making that connection. Two other imminent events could also hit consumers’ pockets, says Sawyer: “Malaysia’s government plans to rework fuel subsidies, and some worry some that will raise inflation. Additionally, new taxes on ‘non-essential’ or luxury goods are coming in; if consumers react negatively to these, you will see Malaysian confidence dip.”

Happiness Reality Check

All of this suggests that Malaysia’s current consumer optimism is at something of a high-water mark and could endure some pain as it fights its way out of the middle-income trap. But it would be wise to assume that Malaysia, as a truly Asian—and truly global—economy, will be as committed to the next phase of its economic transformation as it has been in the past. A brisker march up the value-added export chain is needed, so that increasingly knowledge-based Malaysian workers start to feel that they continue to gain ground. What is clear from the consumer confidence data is that once that is achieved, relaxed and confident Malaysian consumers will quickly reassert themselves

The High Cost of Tariffs for Vietnam

Ross O'Brien — Wed, 18 Jun 2025 04:01:00 +0000

Less than a month remains before the 90-day reprieve on Trump administration’s ‘Liberation Day’ reciprocal tariffs expire and the U.S. starts levying stiff duties on imports from nearly every country in the world. While Trump continues to lob the occasional bombshell—such as doubling steel and aluminum tariffs on June 3—America’s trading partners (and many American traders themselves) in recent weeks have grown more confident that the federal government’s interest in tariffs may be waning.

Another complication for Vietnam is that it is not particularly adept at aligning its interests with those of its trading partners. Despite being extremely dependent on exports and FDI for growth, Vietnam is inconveniently prickly and more than occasionally paranoid in its international relationships.

Proactive Vietnam

Vietnam, however, is taking no chances. The country has taken many steps to ingratiate itself with U.S. negotiators, such as preemptive announcements to reduce tariffs on U.S. imports and pledges to purchase more from America, including buying more liquified natural gas (LNG), cars and planes, and even Elon Musk’s StarLink satellite internet service. The Vietnamese government has also pushed through approvals clearing the way for the Trump family to build a $1.5 billion golf resort outside of Hanoi and a skyscraper in Ho Chin Minh City, even though it seemingly flouts its own foreign investment laws.

The stakes are high: Vietnam’s booming economy and incredibly robust domestic retail sector have been fuelled by fast-rising wages provided by its growing export-oriented contract manufacturing sector. Exports to the U.S. have roughly doubled in value over the last five years, reaching nearly $137 billion in 2024. America accounts for nearly a third of Vietnam’s total exports, largely consumer electronics, apparel, footwear, and furniture.

Smartphone makers, mostly South Korean and Chinese, produced more than 192 million units last year in Vietnamese factories, more than 15 percent of the world’s output. Vietnam has over 2,200 footwear manufacturing businesses, supplying 10 percent of the world’s shoes, making it the second-largest producer—and over 40 percent of that output goes to North America. Vietnam overtook China two years ago as the largest furniture supplier to the U.S., with $9.7 billion in imports in 2024.

America’s Favorite ‘Plus One’ Is Nonplussed

Vietnam’s rapid export growth is in large part because it has become U.S. retailers’ preferred “China Plus One” sourcing destination. For many years American buyers have diversified their supplier base away from China to reduce overdependence on a country that has become both more expensive and a political liability. Ironically, Vietnam has been one of the most attractive ‘plus one’ alternatives because its economy is the most China-like: tightly managed by a centralized government that has been keen to use its large, well-educated and relatively cost-effective workforce to push exports and propel development. As a result, foreign manufacturers have flocked to Vietnam, conservatively pouring between $150 and $200 billion into factories since 1990.

Now in a further ironic twist of fate, Vietnam stands to be punished by its biggest customer for being so successful as a supplier. In Donald Trump’s reductionist (and economically inaccurate) tariff calculus, any country which exports more to the U.S. than it imports is ‘cheating’ America, and needs to be taxed in proportion to the scale of their cheating. This is bad news for Vietnam which had a trade deficit with the U.S. of US$123.5 billion in 2024; only China’s and Mexico’s are higher.

By Trump’s calculations, this works out to a whopping 46 percent reciprocal tariff looming over Vietnam’s future exports. This is putting extreme pressure on the country’s policymakers to take on more imports to balance the trade deficit scales and find other ways to convince the U.S. to give it a break. But these tariffs will also put pressure on the U.S. companies that have become increasingly reliant on Vietnam to keep their costs—and their China risk—down.

Playing the China Card, Carefully

In addition to golf courses and skyscrapers, Vietnam is also trying to show the Trump administration the value of its friendship by helping out in its long-running trade war with China. Vietnam has pledged to crack down on ‘transshipment fraud’ of Chinese goods rerouted through Vietnam to evade U.S. tariffs. The port of Hai Phong has long been suspected of serving as a transshipment hub for Chinese exports, which is only a few hours’ drive from the 800-mile-long border the two countries share.

However, Vietnam cannot afford to be too aggressive in helping the U.S. contain China. Similar to South Korea and many other Asian producers, Vietnam has a vital, interdependent and uneasy trading relationship with China. China is a primary investor in Vietnam’s manufacturing sector, and a source of most of the chemicals, textiles and digital components used in the goods Vietnam uses to assemble products shipped to the U.S. China’s President Xi Jinping visited Vietnam in April (his second trip in less than two years) as part of his post-Liberation Day charm offensive tour to Southeast Asia which included stops in Malaysia and Cambodia, to show China’s continued support for its important manufacturing and trade partners in the region. All this complicates Vietnam’s ability to make a deal with the U.S.

Ambivalent Global Citizen

Another complication for Vietnam is that it has trouble aligning its interests with those of the rest of the world. Despite being extremely dependent on exports and FDI for growth, Vietnam is inconveniently prickly and more than occasionally paranoid in its international relationships.

Vietnam continues to be one of the world’s most restrictive internet economies: Freedom House ranked the country the 5^th lowest on its global Internet Freedom Index. On Christmas day last year, the government enacted Decree 147, a severely restrictive new internet usage law that limits the amount of time citizens can play online games and requires foreign social media companies to host their user data in the country and provide it to authorities, on demand. Vietnam’s iron grip over internet access certainly makes the StarLink agreement look oddly permissive. Vietnam is also near the bottom (173 out of 180 countries) in the Reporters Without Borders Press Freedom Index. A recent issue of The Economist which featured a cover story on Vietnam and its leader To Lam was banned in Vietnam, even though it was only marginally critical of To and his government’s economic reform efforts.

Digital Isolationist

These restrictions make Vietnam look more like the hermit kingdom of North Korea instead of globalist Singapore. This may explain the lack of nuance in Vietnam’s international engagement strategies, such as the brash offers of golf courses and satellite deals to curry favor with America. But more importantly for the future of its economy, throttling internet access limits the flow of ideas and innovation in and out of Vietnam. This in turn will stymie many higher-value industry sectors that the government hopes will eventually transform its economy, such as its surging ecommerce industry, thought to have generated $36 billion in value last year.

Despite, or rather because of, the great success of Vietnam’s export-fuelled growth, it is facing the same ‘middle-income trap’ problem as China and South Korea (Vietnam’s de facto economic role models). As incomes continue to rise—like many export-driven nations, wages in Vietnam have more than doubled over the last dozen years—the country is becoming a less attractive place to assemble finished goods. This means an economic upgrade is needed.

Lack of Champions

Most of Vietnam’s export-driven peers have tried to build up national champions that can both serve the growing needs of their local consumers and eventually begin to start to export products and services to move up the value chain. But Vietnam is still relatively stuck, with its domestic retail economy swamped with international brands. While there are some rising domestic stars, there are few national champions outside of a few FMCG or agribusiness brands.

Vietnam still lacks high-end manufacturing design capabilities (as China and South Korea have), a ‘self-sustaining’ domestic retail economy (like China), or increasingly world-class brands (like South Korea). This means that even if Trump’s tariffs go through (which looks increasingly unlikely in these TACO times), Vietnam will struggle to sustain its growth without a significant shift in its economy. Its domestic consumer markets will also suffer and falter if Vietnam fails to find a path towards higher-value exports, and starts to loosen its iron grip over its digital economy.

In both tariff-on and tariff-off (or -delayed) scenarios, Vietnam’s future also presents risks for U.S. companies. For decades, Vietnam has been a willing and able partner for U.S. brands looking for a substitute for China’s efficient and cost-effective production—like Nike, which produced more than half of its sports shoes and a quarter of its clothing in Vietnamese factories last year.

Tariffs will erode Vietnam’s cost advantages for Nike and other brands nearly instantly. Other footwear and apparel production centers in Southeast Asia will share Vietnam’s fate (Cambodia and Laos are facing similar tariff levels), which will make it difficult for brands to shift manufacturing to avoid these costs. If tariffs do not come to pass, however, Vietnam will still also lose its cost advantage, albeit more slowly, to good old-fashioned wage increases as it continues its rapid ascent to becoming a middle-income country.

In either case, this is a clarion call for Vietnam, its manufacturing partners in the U.S., and elsewhere to take on higher-value-added links in the production chain. Despite concerns about China and its competence in managing increasingly dispersed global supply chains, U.S. brands and others will have work with Vietnamese manufacturers to become more China-like. This means increasing investments in process automation and design in Vietnam while finding ways to export Vietnamese assembly capabilities to other, cheaper countries. In some ways, the threat of tariffs could serve as a catalyst for one of America’s most faithful trade partners to accelerate its own much-needed economic transformation.

Korea and Japan Play Beat the Tariff Clock

Ross O'Brien — Thu, 05 Jun 2025 04:01:00 +0000

Korea and Japan are arguably the U.S.’ closest Asian allies, with mutual defense and cooperation relationships spanning decades. At $228 billion and $150 billion respectively, the pair are also America’s fourth and sixth largest trading partners. So, when the entire world was blindsided by the Trump administration’s punitive tariffs levied on April 2, America’s two firmest friends in Asia felt uniquely betrayed.

Since the Liberation Day announcement, however, the U.S. government has made a dozen or more major changes to its tariff policies: increasing some, suspending others, and announcing many exemptions and adjustments for multiple countries and products. Adding to the global trade chaos have been attempts by competing federal courts to alternatively suspend the tariffs (as the U.S. Court of International Trade rules on 28 May) and uphold them (as the District Court for the District of Columbia did a day later).

Given the growing number of loopholes that America has already created in its numerous tariff negotiations, it is likely that Korea will work out favorable terms when it gets to the table and the Trump administration will make many more concessions to others from which Korea Inc. may also benefit.

Tariff Gamesmanship

As of this writing, the 90-day reprieve on the reciprocal tariffs for Korea and Japan (which currently stand at an additional 25 percent for most goods) will expire on 8 July. Both countries remain in discussions to reduce (and hopefully remove) these tariffs, especially for strategic exports like cars, semiconductors and pharmaceuticals. Both countries appear willing to make important trade concessions to achieve these goals; Korea in particular is keen to support its export sectors and demonstrates a willingness to play by the new U.S. rules.

Yet while some of America’s other large trading partners—the U.K., and even its number one rival China—have rushed to ink their trade deals, Japan and Korea seem content to take their time. This is in part because of complex regional trade relations (in Korea’s case) or domestic politics (in Japan). But the main reason these two countries are fine with running out the tariff clock is the hope that the Trump administration will continue to backpedal, or the ongoing legal wrangling will finally overturn the tariff rulings, or at least continue to delay their implementation. Added to this is the hope that Korean and Japanese investments in America’s manufacturing sector will be recognized by the administration as more valuable to the U.S. economy than the revenue tariffs will generate.

Korea: Between the U.S., and a Harder Place

Korea’s government is managing a careful balancing act in its trade relationship with the U.S. It is trying to rebalance trade levels with America, and has even started to crack down on attempts by Chinese exporters to use Korea as a transit hub to avoid U.S. export bans and tariffs. At the same time, Korea is also preparing for the worst, increasing government support of key export industries, like pharmaceuticals and semiconductors, threatened by higher tariffs from its largest trading partner.

Underpinning this this is the fact that the US market has become increasingly important for such high-growth Korean export sectors as health and beauty, says Hyein Yoon, founder and CEO of Korean social media marketing consultancy HY Marketing. “The U.S. is now Korea’s biggest cosmetics export market globally,” she adds. Yoon points to recent U.S. International Trade Commission (USITC) estimates which put American K-beauty sales at over $1.7 billion in 2024, some 40 percent higher than exports to France, Korea’s second-largest cosmetic market. Yoon feels Korean beauty brands are particularly exposed as tariffs loom, because although “heritage is important” to K-beauty brands’ reputation—and thus overseas sales—the actual domestic market is becoming less so. “Many K-beauty brands don’t even execute their marketing brands in Korea first—they need to reach customers in the U.S. and other international markets,” she explains.

Korean consumers have not begun to purposely avoid American products and brands, as have Canadians, Europeans and others in growing numbers of anti-tariff boycotts. This is partly because, as Yoon explains, Korean affinity for American brands runs deep, and many have effectively localized: “McDonald’s now sells sweet potato fries—in many ways they are considered a Korean brand!” However, she has noticed an increase in discussions on social media sites and in discussion groups on Korean ecommerce platforms “on how to find local substitutes for U.S. products like peanut butter, just in case prices start going up.” Increased tariffs on Korean exports to the U.S. raise concern that Korea might reciprocate, heightening concerns among price-sensitive shoppers.

Trade with China presents another challenge for Korea’s ability to achieve an equitable trade deal with the U.S. China is another important K-culture export market; after the U.S. and France, China is the third-largest K-beauty market, with annual sales estimated at $1.2 billion. But some of Korea’s exports to China could become collateral damage in the years-long U.S.-China trade war.

In particular, Korean technology firms are caught in the crossfire in a tech trade war in which America seeks to curb Chinese access to cutting-edge technology markets and reduce Chinese digital exports. Many Korean companies are key suppliers to Huawei and other Chinese tech giants, such as Samsung Electronics, which is becoming a world leader in HBM (or High Bandwidth Memory chips) which are used in AI and supercomputing applications and are key target of U.S. embargos to China. China accounted for roughly a third of Samsung’s fast-growing semiconductor sales last year, and indirect suppliers and distributors have allowed Samsung to continue selling high-end chips in China.

Speculation is growing that this window may be closing as Korea gets closer to a Trump trade deal, putting Samsung Electronics and other Korean technology giants that are heavily exposed in China under pressure. That said, Trump has already carved out tariff exemptions for smartphones and computers, in response to lobbying and pressure by U.S. technology leaders (not to mention concerns that U.S. consumers will be unhappy with sharp increases in the price of their digital devices). Given the growing number of loopholes that America has already created in its numerous tariff negotiations, it is likely that Korea will work out favorable terms when it gets to the table and also that the Trump administration will make many more concessions to others from which Korea Inc. may also benefit.

Japan’s Security Blanket

Like Korea, Japan’s alliance with the U.S. is based on decades of mutual trust, and a shared strategic vision of regional cooperation and trade. Trump’s attempts to rewire the global economy certainly complicates that relationship for both countries, but it is in some ways a simpler proposition for Japan. One reason is China. While Japan’s two-way trade with China, at over $291 billion, is roughly the same level as Korea-China trade, Japan does not depend on China for as many of its key strategic exports and has been more aggressive in limiting trade in semiconductors and other sensitive technologies or national security reasons. “Japan does not trust China very much now,” says a Tokyo-based business analyst, and therefore may not feel the need to maintain as delicate a balance in its dealings as does Korea.

The U.S.-Japan relationship boils down to one fundamental issue, according to the analyst: “Security. While this can mean food security and energy security, the primary issue for Japan is the willingness of the U.S. to uphold its regional defense security commitments.” Defense is the lens through which Japan views its tariff negotiations with the U.S., even though it appears the Trump administration is not currently linking the two issues, demonstrating a rare moment of geopolitical constraint.

It is likely that Japan will import more food and energy from the U.S. as concessions to trim its trade surplus (an estimated $5.4 billion in April this year). This is despite that food imports have long been a touchy issue in a country that takes pride in maintaining self-sufficiency in rice and other agricultural products. It may not have a choice, however, as growing inefficiencies in food production, exacerbated by Japan’s aging population and shrinking workforce, make Japan ever more dependent on imports.

Poor crop yields and panic buying have significantly reduced Japan’s rice stocks (an estimated 400,000 tons lower this year than last), causing the country to dip into its strategic rice reserves and forcing the resignation of the Minister of Agriculture. The cost of rice has nearly doubled within the last year, adding to Japan’s rampant inflation; at 111.5, the country’s Consumer Price Index hit an all-time high in April, further dragging down consumer confidence.

Throwing Cars Under the Bus

“Economically there is some urgency for Japan to make a deal with the Trump administration, but that’s probably not as important now as the politics,” says Paul Cavey, managing director at East Asia Econ. “No politician wants to be seen giving in to U.S. pressure, at least before the Upper House election,” referring to a vote scheduled for July 13 this year, when Japan will choose half of the members in its House of Councilors, the less powerful (but still influential) of the country’s two parliamentary bodies.

A contentious election has emboldened Japanese politicians to adopt tough rhetoric on the prospects of a trade deal with America, particularly around the country’s all-important auto industry. The U.S. accounts for roughly 30 percent of Japan’s global car sales, and lawmakers have been very vocal in their insistence that the Trump administration must take auto exports completely off the tariff table as a condition of any deal.

At the same time, this stance may be vote-garnering political bluster, rather than a deeply entrenched negotiating position. “Ultimately, Japan would readily throw its auto industry under the bus in a trade deal if their essential security needs were met,” observes the Tokyo analyst, adding that this might not even be much of a concession. “Japan’s carmakers are fairly insulated from tariffs,” because most of the 5.1 million Japanese cars sold in the U.S. last year were also made there.

Japanese manufacturers produced over 3.28 million cars in U.S. plants last year, and many have been trying to increase their capacity, in part because of the perceived weight such investments will carry in trade talks. This includes Honda, which recently announced intentions to transfer production of their new Civic Hybrid 5-door model from a Japanese plant to its U.S. facilities by July this year. “Unlike many of America’s other trading partners, Japan has always been and continues to be willing to make significant manufacturing investments in the U.S.,” says the analyst.

Time Is on Their Side

Korean and Japanese brands stand to lose export revenue and U.S. market share should they be exposed to the full whack of Trump’s tariffs come July 8^th. Moreover, Korea continues to risk getting caught in the crossfire of America’s ongoing tech trade war with China. Yet both countries are in fairly strong negotiating positions, even though, as Asia’s primary security guarantor, the U.S. does hold some serious cards. The pair are rare exceptions among America’s top trading partners in their willingness to increase investment in U.S. manufacturing and are both important sources of technology and innovations that further American productivity goals.

This will serve them in good stead in their respective discussions with the U.S. But the primary lever both Korea and Japan have to pull in their favor is time: time enough for more and more exemptions to be doled out for other countries and industries, and time for more U.S. legal battles to be fought in federal court. All of this will also create more time for the implications of much higher prices on cars, cosmetics and other key items to sink in for American lawmakers as consumers grow ever more cost-conscious.

The Rise of Special Forces Tourism in China

Ross O'Brien — Thu, 22 May 2025 04:01:00 +0000

Every day, hundreds of tourists, often in large tour groups from Korea or Mainland China, stop at a graffiti mural on the corner of Graham Street and Hollywood Road in Central Hong Kong. It depicts Yaumati, a famous Hong Kong neighborhood, and takes up the entire side of the flagship store of Goods of Desire (commonly abbreviated as G.O.D.). G.O.D is a 30-year-old retailer that uses pre-handover Hong Kong iconography and themes (the Yaumati scene is one of its signature prints) in its funky reinterpretations of Chinese fashion and homeware. It is an Instagrammable moment for hundreds of social fans.

Hong Kong brands often trade in ironic, sometimes risqué reinterpretations of familiar cultural items. Another one of G.O.D.’s signature designs is the Angry Cat—a cheeky riff on the Japanese Maneki-neko, or ‘fortune cat’, which traditionally sit in shopfront windows waving in good luck. (G.O.D.’s version has the cat making a different, ruder, gesture.)

While G.O.D. proudly notes on its website that the mural is one of the city’s “most Instagrammed walls,” when I visited the shop on a busy Sunday afternoon during “Golden Week” (a long holiday for China, Japan and other East Asian countries anchored around International Labor Day on the first of May), only a few shoppers circulated in the store, despite the throngs Instagramming outside. This is the bane of retailers with social moments that outweigh the merchandise.

“The visitors who take pictures are not usually our customers,” says one of the shop managers, although occasionally some will wander in “for small items. A keychain. Maybe a pair of socks.” As if on cue, a young Korean couple starts making their way to the checkout counter, each holding an identical pair of socks as souvenirs.

Social Media Tourism in China

Hong Kong received 213,0000 visitors from Mainland China during the first day of the Golden Week holiday—a welcome boost for practically the only Asian city left behind by the world’s post-Covid tourism boom. Over 919,000 Chinese visitors came over the entire holiday period, over 21 percent more than the year before. Hong Kong has clawed its way back onto global travelers’ bucket lists through a tremendous investment in exposure, including in particular enlisting social media influencers from China and elsewhere to visit and post about their experience.

Social media-enabled tourism, however, has proven to be a double-edged sword for Hong Kong. Large numbers of Asian travelers now use Instagram and other platforms to plan and execute their itinerary. Travelers to Hong Kong increasingly dash around the city to hit a set of sights using the guidance of social media influencers or lists of Instagrammable venues. Often this is done with military precision (and, unfortunately for local retailers, on a tight budget) by groups of young Mainland Chinese tourists, who have been given rise to a trend known as “special forces” tourism.

Grab and Gone

Social media has successfully lured new visitors to Hong Kong, but has created a new class of tourism that isn’t translating to retail spend. Tourists do stop and make purchases—particularly if their impulse buys also create post-able moments. This has created a mini-boom for artisanal bakeries, bubble tea shops and traditional Hong Kong milk tea houses. Three local Hong Kong bakery chains—The Bakehouse, Vission Bakery, and Tai Cheong — have risen to Instagram stardom as a must-visit stops along the Graham Street graffiti walking tour. Signature packaging allows ‘Grammers to take selfies and shoot unboxing videos as soon as they’ve made their purchases.We’ve seen a great amount of business this Golden Week. Everyone found us through someone else’s Instagram posts, and everyone takes a photo with their own purchases,” says a counter worker at Vission, describing how a global following for its matcha mochi Danishes and decorative cakes was organically built up on social media.

This is beginning to have an impact on the hospitality scene along Hong Kong’s Instagram Trail. “I know several restaurant owners in Central that have decided to switch their fit-outs from dine-in to grab-and-go bakeries, because that seems to be what the tourists want,” says a restauranteur in Hong Kong’s Central district.

Social Strategies

Other hospitality brands have tried more active and engaged social media strategies, with some limited success. When the American streaming sensation IShowSpeed made a highly publicized trip to Hong Kong, a local pizzeria enjoyed a moment of online buzz when it posted an Instagram reel showing its attempts to deliver him a pizza. Although the YouTuber quickly gave it back when his fellow passengers warned him that eating on Hong Kong trains is illegal, the pizza box was highly visible in his hands for a few precious seconds.

British extreme eating online personality Big John recently increased the popularity of a few Hong Kong bars and restaurants when he paid a visit. According to restaurant industry professionals, however, Big John’s fan base of largely teenage boys only created headaches for the doormen checking IDs. A third restauranteur reported a reasonable uptick in business after hiring Mainland Chinese online influencers (which can be done for roughly $3,000 to $5,000) to post their dining experiences, but that the per-patron spend was less than expected. “Everybody got sharing plates or split appetizers family style.”

A Hong Kong Inside Joke

Another challenge that even the most iconic ‘Gram-friendly’ brands and retailers in Hong Kong face is that they are selling to an extremely narrow niche market. Many of Hong Kong’s more unique shopping destinations are refurbished heritage sites—among them PMQ, Tai Kwun and Central Market—and house collections of local fashion microprenuers and designers whose brands in part depend upon a nostalgic, and often campy appreciation of local culture and history. The signage and design elements of many local brands and eateries drawing from styles Hong Kong’s postwar boom times or the classic kung fu movies. One of Hong Kong’s original nostalgic brands, Shanghai Tang, began taking styles from even earlier eras, and to this day its fashion collections still evoke jazz-era 1930’s Shanghai and 1940’s Chinese Communist Party chic.

Hong Kong brands often trade in ironic, sometimes risqué reinterpretations of familiar cultural items. Another one of G.O.D.’s signature designs is the Angry Cat—a cheeky riff on the Japanese Maneki-neko, or ‘fortune cat’, which traditionally sit in shopfront windows waving in good luck. (G.O.D.’s version has the cat making a different, ruder, gesture.) Some wonder if leaning so heavily on in-jokes to sell local fashions and tchotchkes misses out on a broader audience—particularly those tourists who currently make up the bulk of visitors. “What tour group of Chinese or Korean retirees wants to buy the same familiar trinkets they see at home? Will they even appreciate the irony?” asks the Central-based restauranteur.

Hong Kong’s self-effacing, irreverently reverent style certainly has its admirers. “We have many fans,” says the G.O.D. store manager, such as European expats that have been in Asia a long time, and in particular Malaysian Chinese tourists “who really seek out our modern reinterpretations of classic Chinese designs.” However, unlike the global aficionados of K-Culture and J-Culture (Korea and Japan, respectively), the worldwide HK-Culture fanbase is likely too small to support a substantial cultural export industry.

Are You Experiential?

Hong Kong, like Asia’s other traditional shopping hubs, has been in a state of flux since the pandemic. Asian regional tourism levels in 2024 have still not climbed back to pre-Covid numbers (with the notable exception of Japan which, as we’ve reported, continues to wrestle with its deluge of tourists). Digital outreach has helped Hong Kong build its volume, but is has not moved the needle much of retail sales, and this, compounded with the exorable cannibalization of digital shopping platforms, means that Golden Week holidays and or other shopping-themed events are insufficient means to sustain Hong Kong’s destination retail business.

There are indications, however, that Hong Kong is beginning to turn a corner in its quest for higher-value experiential retail—and ironically digitalization and the long tail of the pandemic have actually accelerated this transition.

Hong Kong’s years-long lockdown served as a mother of invention for many high-end retailers, which were forced to reimagine their customer transactions through a digital lens to revive sales. Luxury brands in Hong Kong, as elsewhere in Asia, have been working to “phygitalize” their retail experience, and this is quickly dovetailing with another trend impacting technology decision-making: the move towards large-footprint ‘experiential’ retail establishments which mix shopping with restaurants, spas and other leisure offerings, and dedicated spaces and services for VIP clients.

Louis Vuitton plans to open a 40,000-square-foot megastore in 2026 in Hong Kong’s K11 MUSEA – a high-concept mall which blends luxury retail and curated art spaces; the luxury giant reportedly will reserve significant floorspace for a museum, cafes and a lounge for key customers. Prada, which closed its pricey Hong Kong flagship in 2020, is also reported to be joining LV at K11 MUSEA with a new 8,000-square-foot flagship. Prada has only dabbled in hospitality and luxury lifestyle experiences; Prada Caffè operates in London’s Harrod and at Prada Resort, its luxury ‘members club, and the brand has been incorporating skincare and other wellness offerings in some of its flagships. It is more than likely that some of this will be replicated when they open at K11 MUSEA next year.

All of this will require fashion retailers to undergo still more digital transformation, in the words of a Hong Kong-based technology executive for a global brand: “Selling coffee is different from selling clothes; it requires new Point of Sales systems, and maybe even different ERP systems.”

The Lonely Planet to White Lotus Pipeline

Cheap travel can be cheerful. A steady stream of globe-trotting backpackers, toting iconic Lonely Planet guidebooks, served as the cornerstone of the tourism industries of Thailand, Indonesia’s Bali and other Asian destinations. Welcoming budget travelers helped Thailand, which serves as the backdrop for the latest season of HBO’s luxury resort dramedy The White Lotus, build a tourism sector that makes up almost a fifth of the country’s annual GDP, which includes an estimated $5 billion in luxury tourism spending.

Today’s thrifty and speedy Special Forces travelers from China and elsewhere offer Hong Kong a similar opportunity. Instagram-propelled tourism has already built a deeper global appreciation of the city as a destination, and has fostered appreciation of established and emerging iconic brands in Hong Kong, even if there is not yet much in the way of retail sales to show for it. Budget travelers continue to cause concern among Hong Kong economic planners, who have been frantically rolling out plans to make the city more attractive to high-spending families and luxury travelers.

But what policymakers are overlooking in their panic is that Special Forces and other ‘Gram-fueled tourists can serve many roles. Currently they act as ‘shock troops,’ and while many are not big spenders, they definitely contribute to Hong Kong’s growing social media visibility. Over the longer term, they may also serve as an important aspirational demographic: one that is well-attuned to navigating digital channels to customize their travel and retail experiences in Graham Street today and may graduate to the VIP pleasure palaces of Hong Kong’s luxury flagship stores in the years to come.

U.S. China Trade War: Chaos for Christmas

Ross O'Brien — Thu, 08 May 2025 04:01:00 +0000

Don’t mistake pauses, blinks and exceptions for progress in Trump’s global guerilla trade war. While retailers in some categories are starting to feel a reprieve as the administration grants exceptions and ‘does deals’ with individual countries and companies, there remains little hope of a cohesive and transparent global trade policy emerging anytime soon. The U.S. China trade war is real and present. Shipments from Asia and elsewhere to the U.S. are still largely on hold, as suppliers and buyers alike bide their time hoping Trump’s inconstancy will end.

Crippling tariffs are triggering some suspicious workarounds. The Korean Customs Service recently announced the discovery of over $20 million in goods from China masquerading as Korean exports destined for the U.S. in a stepped-up effort to comply with American Country of Origin requirements. Indonesia is revisiting plans to impose triple-digit tariffs on textiles and other Chinese goods, as many suspect China of using Indonesia as a re-export hub to avoid U.S. tariffs.

Backlogging and Logjamming

The resulting disruptions are already creating massive logjams in the global supply chain. If they are not unblocked in the next few months, retailers will be facing bare shelves (and ecommerce fulfillment centers) come back-to-school and Christmas sales runways, and producers, sources and brands will attempt to push off the tariff-induced cost risks onto each other. Pricing strategies are in complete disarray as a result of this wait-and-see game, which may actually hasten the arrival of the recession producers and retailers on both sides of the Pacific fear.

American brands and retailers prefer consistency in their market outlook, particularly in these months running up to the all-important holiday season. While future consumer demand is never absolutely knowable, sales forecasting and production planning can tamp down uncertainty and keep shipments flowing. This is simply not possible today. Neither just-in-time production processes nor sales analytics tools will overcome the complete uncertainty of the Trump administration’s capricious and piecemeal trade policy.

History as Prelude

For roughly a half-century since Walmart established its first Asian buying office in Hong Kong, U.S. brands and retailers have relied on shipments from China and elsewhere in Asia as well-organized sourcing supply chains. These manufacturers ship the majority of goods needed to fill shelves (or fulfillment centers) for the annual back-to-school and holiday shopping seasons between May and August.

“I would expect most everyone’s major shipping season to be between July and September to catch Christmas sales,” says the Hong Kong-based sourcing manager of a consumer electronics firm. There is some flexibility, though: “It’s all a bit fluid depending on the final destination and any year’s one-off problems: such as strikes, weather events, or conflicts.” She believes nearly everyone needs to get their products into containers and onto ships by October at the latest. “Retailers really under the gun can also choose to air freight, which can be done as late as November and still make to by the holidays.”

Made Somewhere Else

As we’ve reported, the assertion that the U.S. is ‘losing’ to China and its other global trade partners is hard to justify, and much economic data suggests that outsourcing production has only enriched America. Since 1981, U.S. GDP has grown ninefold, and its non-food retail markets ($6.3 trillion in 2024) are more than a dozen times larger than they were when Walmart established its first Asian outpost. Manufacturing jobs have decreased by 35 percent since 1981 and non-college-educated workers have experienced wage stagnation, but this has been the plight of blue-collar workers since the 1940s, decades before American factory jobs were ‘lost’ to cheaper destinations.

The reshoring of manufacturing will not reverse this trend, even if it were the actual endgame of Trump’s tariff-based trade war. This is, in the view of suppliers, because very little relevant manufacturing capacity exists today. “No one is making our stuff in the U.S.,” says one supplier of gifts and homeware to big box retailers which sources from China and other Asian markets, with the exception of one item: “a simple plastic bucket.”

This supplier’s decades long business has survived innumerable supply and demand shocks over the years, but the last month has been a particularly unanticipated form of chaos. “The initial (China tariffs) were disruptive and landed on us after we had received orders for shipping to meet the back-to-school and holiday seasons. It took us weeks working with customers, adjusting their prices down and negotiating with factories…all sides tightened margins, a lot of items would see price rises, some purchase quantities were cut, and some items eliminated.” He reckons that Trump’s first salvo reduced orders by eight to 12 percent of his clients’ original commitments.

The 145 Percent Rule

All this hard work was for naught when the proposed U.S. tariffs on Chinese goods went up to 145 percent or more. “In the weeks since the pause, reality has set in. Both sides have dug their heels in.” The ‘pause’ caused an expected chain reaction: “Goods at forwarders have been returned or turned back and are winding up at the production facilities. The pause in shipping has caused an almost complete stop in production, and facilities are reluctant to take on the risk.” As the weeks pass, he fears the window for shipping for the upcoming seasons is closing “and when and if tariffs are ‘finally’ reduced and (producers) open back up, all hell will break loose to get production done and get goods out.”

Several sources have told The Robin Report that the majority of their China-based factories have had all their orders to U.S. clients orders fully stopped, “Some on hold by their customers, some lack the confidence, some also said their warehouse already full of goods due to the pause status which they need to stop production to avoid more similar situations.”

Hope Springs Eternal

This is beginning to change. “This week there is some hope in the air that he’ll lower tariffs so we can get on with summer orders and production,” says the Hong Kong-based sourcing manager. Trump continues to dole out carveouts and exemptions to those that seem to have his ear on bended knee, or for strategic industries such as the automotive sector. Trump has reportedly allowed U.S. car makers to claim reimbursements on imported parts and materials (including all-important aluminum) for vehicles assembled in the U.S., thanks to intensive lobbying.

Workarounds

News that Walmart and other big box players have put the word out to suppliers to resume some trans-Pacific shipments have sourcing agents and shippers in Asia believing that the big bosses of American retail have also worked out an arrangement with the Trump administration. Apple’s recent announcement that it will completely shift iPhone assembly away from China to India could also be interpreted as a concession to the U.S. government (Trump excused smartphones and other electronics from additional tariffs on April 11.) Even if Apple is moving factory jobs to India and not America, they are still moving them out of China.

Asian countries themselves are also trying to demonstrate their willingness to make deals with the U.S. Some of these efforts predated Liberation Day: In March, Vietnam announced plans to reduce tariffs on U.S. imports and purchase more from America, including Elon Musk’s StarLink satellite internet service, a huge concession for a country which has some of the most restrictive internet access laws in the world.

The threat of crippling tariffs is triggering creative workarounds. The Korean Customs Service recently announced the discovery of over $20 million in goods from China masquerading as Korean exports destined for the U.S. in a stepped-up effort to comply with American Country of Origin requirements. Indonesia is revisiting plans to impose triple-digit tariffs on textiles and other Chinese goods, as many suspect China of using Indonesia as a re-export hub to avoid U.S. tariffs.

All these scattered deals are fueled by desperation and brinkmanship in the run-up to looming tariffs and are not seen as parts of a comprehensive trade policy by industry participants. “Uncertainty prevails,” says an auto parts supplier, who believes that even firms that are benefitting from Trump’s sporadic acts of largess cannot effectively plan for the future. “Things seem to be getting better, but what the automotive sector needs to hear is that the decisions made will be held to and not changed on a whim.”

China’s Role

Most important, however, is the fact that the key player—China—has seemingly refused to join in the Trump dealmaking discussions. This has naturally infuriated Trump and set in motion tit-for-tat new tariffs and trade restrictions. Neither Trump nor Xi seems keen to be viewed as backing down. However, resolve seems to be steadily weakening on both sides, as seen in the endless stream of exemptions from the U.S. Equally, China has discovered that it cannot live without Boeing aircraft in the same way Trump found it impossible to deprive Americans of their iPhones.

This likely means that a wobbly path back towards ‘normal’ trade relations is being plotted in the backrooms of Beijing and Washington. It is not being done ‘normally,’ through orderly and transparent bilateral discussions. Nor are concessions being implemented in any comprehensive way, leaving every business and trading partner to fend for themselves. As a result, the critical shipment weeks before Christmas are going to be wasted all along the global supply chain, each part fearful of getting stuck holding the tariff bag if and when it gets delivered. Contingency planning for supply outages, and revising margins as low as can be endured, will, unfortunately, be every brand’s only recourse this holiday season.

The Flaw in China Tariffs

Ross O'Brien — Wed, 16 Apr 2025 04:01:00 +0000

There is little point in trying to plot the trajectory of Donald Trump’s tariff strategy (there is little point in calling it a strategy, but we’ll come back to that). There have been many reversals and flip-flops since April 2 when the president first levied a raft of confusing, ridiculously designed tariffs on nearly every country in the world (and some places that aren’t even countries) and then began to immediately walk parts of them back.

China’s pain will become everyone’s pain, particularly if U.S. Customs starts to ferret out every possible Chinese input along the global supply chain, unpacking every automobile produced in Mexico or T-shirt in Vietnam to determine the extent to which it is, or isn’t, “substantially transformed.” If the U.S. persists in tariffing all of China’s productivity, all costs in every market will go up.

Connected and Complex Economic Policies

Higher manufacturing prices to U.S. suppliers will force them to raise their cost of sales to non-American markets that aren’t tariffed. A Hong Kong-based toymaker told me that it is highly likely that she’ll have to raise prices to Canada, Europe as well as other markets to recover some of her anticipated lost revenue in their U.S. sales. It will be impossible to recoup it all, however, as the U.S. is 80 percent of her global market.

The latest (as of this writing) reversal is a case in point. Trump’s current exclusion of Chinese-produced smartphones, computers and other digital products from the list of goods to be tariffed runs counter to the U.S. government’s core claims that its nearly decade-long technology trade war is being waged to limit access to foreign technology markets for reasons of national cyber-security. It also does not align with a long-stated objective of the administration to motivate American manufacturing businesses, particularly those that produce high-value products, to relocate their production to the U.S., creating jobs and reducing its reliance on foreign imports.

The China Trump Card

Much analysis over the last two weeks has been given to distinguishing between the U.S. trade position on China versus the rest of the world, with the underlying assumption that exporters from every other country are now “safe” — despite the fact that not a single retaliatory tariff has been withdrawn, only “paused.” But this is a pointless distinction for three reasons, which all brand owners and retailers must understand and appreciate in their forward planning:

China is deeply embedded in the rest of the world’s economies, as both a primary trading partner and a supplier of manufactured components. It is impractical to assume that tariffs alone will extract China from global supply chains.
Beyond this, China has many other means to resist U.S. tariff pressure, meaning that China is probably willing and able to weather a very long trade war, and do so relatively unscathed.
To assume that there is an end game in the China tariffs is to assume that there can be a strategy to work around them. This is not the case—maintaining continuous uncertainty and chaos are the only “Liberation Day” goals.

China’s Pain Is All Our Pain

The Trump administration believes that the American economy is too important for China to not back down. It’s true that China exports more to the U.S. than to any other country—over half a trillion U.S. dollars in 2023, and nearly $525 billion last year. But this is not even nine percent of the $6.1 trillion China exports globally. Two important economic blocs, the EU and ASEAN, each account for as much trade with China as the U.S. Some 120 other countries—which collectively generate over half of global GDP—count China as their top trading partner. China is the lynchpin of nearly everything in the world’s supply chain. It produces half of the world’s digital devices, 60 percent of its extruded aluminum and more than a third of its textiles and consumer appliances. Importantly, more and more of China’s exports are sent to factories in other countries, from Southeast Asia and East Africa to Mexico, where they are key inputs to finished goods which are then shipped to the U.S.

The American market is important for China, but not critical. It’s true that China exports more than three times the value of products to the U.S. than America sends to them and, in the words of a Vietnam-based investor, “No one can replace the global dominance of the American consumer.” China still has many other places to sell its wares, and Chinese semiconductors, steel and rayon are all essential ingredients in everybody else’s exports to the U.S. It is impossible to split China off from the rest of the world.

China’s pain will become everyone’s pain, particularly if U.S. Customs starts to ferret out every possible Chinese input along the global supply chain, unpacking every automobile produced in Mexico or T-shirt in Vietnam to determine the extent to which it is, or isn’t, “substantially transformed.” If the U.S. persists in tariffing all of China’s productivity, costs to every market will go up. “Where does extracted aluminum come from? Where does the coal come from to power the smelting plants?” asks a manufacturer of vehicle components in Asia. Complex manufacturing reshoring is a years-long process (one that would likely only be completed by the time another administration enters the White House) and U.S. facilities will still be dependent on core raw materials imports.

Punitive Tariffs

Higher prices to the U.S. will even force suppliers to raise their cost of sales to non-American markets that aren’t tariffed. A supply chain manager of an American manufacturer of digital games and educational devices reckons she will have to raise prices in Canada, Europe and other markets to recover some of her anticipated lost revenue in their U.S. sales. “Essentially the cost of my products has more than doubled–as has most other producers who have some degree of electronics in their products.”

The Robin Report has spoken to several Asian-based manufacturers of components and finished goods who indicate that while “Country of Origin” (COO) forensics are not extensively used, as they are costly and lengthen customs clearance times, they could be ramped up if the U.S. becomes determined to tariff Chinese goods entering the U.S. through other channels, or as parts of goods assembled in third-party countries. But this will involve a significant increase in customs inspectors and inspection processes, and in the words of the head of cargo business for an Asian-based airline, “We don’t see how that capacity will be added quickly. Even if it is, it will result in a tremendous slowdown in American trade with the rest of the world.”

China’s Upper Hand

“We believe this trade war will go on for a long time,” says the air cargo head. One of the reasons he believes this is because while China’s trade imbalance with the U.S. will indeed leave it very exposed, it has a lot of ammunition on hand. China has already begun to loosen its monetary policy to weaken its currency and help exports. China is likely to restrict the release of movies from the U.S.—meaning that Zootopia 2 is unlikely to be as profitable as its predecessor–something that has accelerated Hollywood’s concern.

Many believe that U.S. companies that have active service businesses in China will also suffer. “If the government tells you to stop buying coffee at Starbucks in Beijing or hamburgers at McDonald’s in Shanghai, you’ll stop,” says one Hong Kong-based owner of a components manufacturer that exports to the U.S. and Europe.

China’s entire consumption economy is also driven by local a few super-apps (primarily Alipay) and it would be very easy for compliant Chinese tech firms to make it more difficult for consumers to tap-and-go a Starbucks macchiato if Beijing so chooses. Even if there are no formal boycotts, patriotic Chinese consumers could easily switch to any of their many fast-growing and comparable homegrown Chinese megabrands. Local giant Luckin Coffee saw its 2024 revenues grow 38 percent to over $47 billion last year, surpassing Starbucks in China.

Finally, China’s global trade connectivity means that Chinese firms, and those that rely on Chinese parts and products, will likely be able to work around tariffs. This is already happening around de minimus trade as a litmus test for how global supply chains will rework themselves. While China’s ecommerce champions can no longer ship fast fashion and consumer goods directly from China to the U.S. (until there is evidence that COO inspections are on the increase), they will simply ship from everywhere else China manufactures products. “We have already put on additional capacity in Southeast Asian hubs, and there is a real possibility that air cargo companies will increase their freight and fulfilment hub capacity in Europe” in the short term, says the air cargo head.

Chaos Is not an Economic Strategy

The whole point of the Trump administration’s tariff action is to cause chaos and keep all trading partners off balance in an effort to create a perpetual state of control and extract ‘deals.’ This means that nowhere is safe. “China plus one” sourcing strategies have been a mainstay of producers with exposure to U.S. markets for years before even Trump’s first term to diversify productivity and have safer locations to ship goods to the U.S. However, the fact that outside of China most tariffs have been ‘paused’ is no great comfort. In the words of a vehicle manufacturer, “No one is now moving production anywhere else, as every place can potentially be at risk. Neither, however, is anyone seriously considering moving to the U.S.”

The 90-day reprieve puts a particular ticking clock under these one-to-one negotiations. As a supply chain manager noted, June is the shipping date to the U.S. for Christmas, and not knowing whether or not a particular country will be ‘safe’ by that time is making forecasting impossible.

Moreover, given that many toy and gift categories have semiconductors or electronics in them, it will be hard to categorize them as anything other than a pile of Chinese components if the U.S. ramps up its COO strategies. The toy manufacturer already shipped a fair amount of supply to the U.S. months ago like Apple did from India, which may see her company through Q4, but new releases and models are coming onstream soon. “I can last a few months, but I can’t last out the year with the inventory I’ve shipped–and I won’t be able to sell my latest models at Christmas time for less than 200 percent of last year’s cost.” The vehicle parts manufacturer notes that smelted aluminium comes largely from China, and while the firm set up shop in Thailand several years ago to diversify away from China to lessen import duties, he has already heard of contract manufacturers who have stopped receiving components from China, waiting to negotiate ‘pain sharing’ from their suppliers up and down the value chain.

Let’s Make a Deal

Chinese value chains extend widely and deeply across most other global manufacturing clusters for most industry sectors. Any country that manufactures products with Chinese inputs (which means practically everything) exposes itself to increased scrutiny—and increased tariffs—if the U.S. does choose to invoke stricter COO inspections. If U.S. customs do not, then things go back to the way they were—a global trade ecosystem where China passes its exports through third-party countries, and every country (except the U.S.) benefits from their increasingly efficient and high-quality inputs.

Contrary to the optics, China is not ‘singled out’ in this trade war. Most of the rest of the world, including U.S. producers themselves, are subject to crippling tariffs. Further, American brands are unable to plan until the tariff chaos is resolved. Reshoring is impractical; the natural resources, electronics and machinery needed to make the U.S. manufacturing independent will not materialize on American shores any time soon. And, as China has many more tools at its disposal to fight back against import tariffs, it will be able to endure this global pain longer. If the tariffs are ultimately about capitulation to make a deal with the U.S. administration, China may have the upper hand.

Asian Sustainable Fabrics Take the Lead

Ross O'Brien — Wed, 26 Mar 2025 04:01:00 +0000

Asia is emerging as a critical innovation node in the development of sustainable textiles. Spiber, a Japan-headquartered biotech firm is developing a ‘brewing’ process to convert sugarcane waste into staple fiber that can be woven into fabrics and bringing it to scale in a facility in Thailand. Singapore-based material science firm NEXTEVO has recently commissioned a plant in Vietnam that turns pineapple fiber into ready-to-spin (RTS) fibers.

The fact that Asia’s low-carbon textile production is small-scale and high-end may actually work in its favor, both for the success of the firms in the space and the health of the planet overall. Call it the luxury trickle-down effect. The influence of high-end brands on the mass market is a pervasive feature of the fashion industry: Designs, technologies and processes from luxury labels set trends in motion that rapidly take hold in the firmament of the industry as a whole.

Asia Holds the Green Line

Asia’s emerging greentech textile ecosystem is employing multiple tried-and-trusted economic development models. One key advantage: Five Asian countries exported some $437 billion worth of textiles last year, three-quarters of the total value shipped by the world’s top ten exporters. This manufacturing prowess is combined with Asia’s growing leadership in materials science and biotech engineering.

Asian economies also have a penchant for sharply focused industrial development policies to promote R&D around key disruptive technologies. Singapore’s government in particular relentlessly attracts greentech innovation and investment: Its 2025 budget ramped up green financing initiatives and promotion of low-carbon technology. In early 2024, Japan began issuing Climate Transition Bonds and the government ultimately plans to provide some 20 trillion Yen (US$134 billion) in seed investment for low-carbon technology projects over the next decade. Asia’s continued promotion of new clean technologies is turning the region into something of a green outlier in 2025. U.S. financial markets are turning positively hostile to sustainable investment in the Trump 2.0 era, and even the European Union is beginning to waver on its green financing commitments as fears around its crumbling economic competitiveness grow.

Sustainable Textile Growth

Asia’s move into sustainable textiles is well-timed, as it gives the region a new competitive arrow in its quiver at a pivotal moment in global trade and geopolitics. The region is not in any real danger of being dislodged from the center of the world’s textile value chain: Asian apparel producers consume an estimated 85 percent of the world’s fibers. China alone still accounts for 40 percent of global apparel production, despite nearly a decade of concerted efforts of U.S. and European brands to diversify their supply chains away from the country.

However, the U.S. is both intensifying its trade war against China and threatens to widen its tariff net globally, making Asian brands and apparel manufacturers nervous. Just as Hong Kong turned towards AI-enabled innovation in apparel design to enhance its role as a leading command center in the global apparel value chain, Asia’s forays into sustainable fabric production will help buttress its position in the global textile trade by diversifying product portfolios and creating new production efficiencies.

As Smooth as Silk

Spiber’s approach to textile production emphasizes both efficiency and sustainability. Since 2007 the company has been developing fermentation processes based on combining proprietary DNA with microorganisms in agricultural by-products to convert them into specific protein polymers. The company launched its Brewed Protein material in 2015, and in 2022 opened its mass production fermentation plant, with an annual output of 500 tons of polymer, in Rayong Thailand.

“The cost curve of sustainable fabric production in the years to come will be influenced by advancements in material development, scalability of production, and investment in manufacturing infrastructure” notes a Spiber executive who spoke to The Robin Report. “As we scale up for large-scale commercial production, our supply chain and production processes will continue to evolve to enhance efficiency and sustainability.”

Brewed Protein fibers have been spun into a variety of filament yarns, primarily for high-end garments, such as silk or cashmere analogs. Brewed Protein fabrics have formed the basis of a collaboration with Japanese designer Issey Miyake, who has incorporated them into their “TYPE-XI Spiber project,” within the fashion house’s A-POC Able collection which showcases technology-forward new materials and production processes. Other Spiber collaborations have been with outdoor performance brands such as Goldwyn Co, which released 17 items from four of its brands, including The North Face and Woolrich, as part of its ‘Regenerative Circle’ undertaking in its Fall/Winter 2024 collection.

One of the biggest challenges for low-carbon textile companies, Spiber notes, is the time and capital needed to bring new materials to market. “The cost dynamics differ greatly between lab-scale production and mass production, where cost efficiency is crucial for commercialization.” Transitioning from the former to the latter is complex.

“One key focus is the utilization of agricultural waste and by-products as feedstock. We have successfully conducted trial batches using bagasse-derived sugar at our Thai production facility and plan to integrate it more extensively into commercial production to support our sustainability goals.” While production volumes are still low, Spiber notes they are scaling production at their Thai plant “while adjusting output based on business needs” and developing to find cost- and time-saving improvements. “For instance, in 2023 we began cutting and crimping our fibers in-house at our Tsuruoka facility in Japan—a process that was previously outsourced. Insourcing allows us to optimize processing conditions, maintain consistent quality, and reduce supply lead times” which the company believes scalable production process as we expand.”

Spiber estimates that 200g of protein polymer (roughly the volume needed to spin fibers to create a square meter of fabric) produced through their fermentation process takes 40 hours. The company uses agricultural waste and by-products as feedstock for its polymers, currently primarily from sugarcane, certified by Bonsucro, which defines standards for environmental and socioeconomic sustainability in the global sugarcane industry and manages a certification system for sugar mills that supply Spiber. The environmental impact of this is profound: Spiber’s 2023 life cycle assessment study compared Brewed Protein fibers to Mongolian cashmere fibers or Australian merino wool fibers, and found their product uses 79 percent less greenhouse gas emissions, 99 percent less land and 97 percent less water than comparable luxury fibers.

The Long Trickle Down

Spiber’s Brewed Protein and other sustainable fiber products remain niche offerings, largely offering green alternatives for silk and other high fashion applications. This clearly limits the decarbonization impact that these firms have on the world’s textile industry. And while every little bit of green helps, quite a lot of sustainability is needed: It is estimated that less than one-half of one percent of textiles in the global supply chain are currently sourced from recycled material. Textiles make up the bulk of the global garment industry’s carbon footprint, which is variously estimated to contribute between five and ten percent of the world’s total annual greenhouse gas emissions.

Yet, the fact that Asia’s low-carbon textile production is small-scale and high-end may actually work in its favor, both for the success of the firms in the space, and the health of the planet overall. Call it the luxury trickle-down effect. The influence of high-end brands on the mass market is a pervasive feature of the fashion industry: designs, technologies and processes from luxury labels set trends in motion that rapidly take hold in the firmament of the industry as a whole. The broader influence of designers like Issey Miyake and high-performance brands like North Face may not be precisely quantifiable, but it is palpable.

The use of low-carbon fabrics on a wide enough scale may take time, but the technology processes which underpin the conversion of bio-waste into polymers are quickly reaching scale, and Asia’s garment sector is renowned for its ability to expand quickly on new processes once the trifecta of lowered capital costs, process efficiency and fashion cachet are met. Asia’s textile innovation crucible could soon (not immediately, but perhaps within the next three to five years) produce cheap and carbon-neutral fabric in volumes that could both materially impact the industry’s carbon footprint and sustain the region’s command of global supply chains.