China has placed the owner of Calvin Klein and Tommy Hilfiger on its blacklist, a move that could compel the company to close stores and cease manufacturing operations in China as an early consequence of President Donald Trump’s trade war.
On Tuesday, China added PVH Corp. to its “unreliable entities” list, granting the Chinese government the authority to impose fines, restrict import and export activities, revoke work permits, and deny employee entry into the country, among other broad measures.
China’s Ministry of Commerce began investigating PVH in September for allegedly refusing to source cotton from the Xinjiang region, known for its Uyghur detention camps.
On Tuesday, Beijing officially placed the company on its blacklist. The decision followed Trump’s recent imposition of a 10% tariff on Chinese imports and came alongside additional retaliatory actions by China, including new tariffs on energy imports and agricultural equipment.
“There’s this tit-for-tat trade war going on, and [China] wants to show the United States that it’s going to take action to hurt either big U.S. companies or companies with significant interests in the U.S.,” said Michael Kaye, a partner at Squire Patton Boggs with over 30 years of experience in international trade law.
“They’re being made an example. … My guess is, [China] wanted to pick somebody and they wanted it to be somebody that was high visibility.”
With PVH now on the unreliable entities list, China could mandate the closure of its numerous retail locations in the region and bar it from selling products online to Chinese consumers, Kaye noted. Employees, including those who have established lives in China, could be effectively deported.
It remains uncertain whether China will enforce these actions in Hong Kong, where PVH’s Asia-Pacific headquarters is located. In 2020, China enacted a law extending national enforcement authority over Hong Kong, particularly in areas concerning national security, which could include the unreliable entities list, according to Kaye.
As of Thursday morning Eastern time, PVH continued to operate as usual in China. China may also prohibit PVH from manufacturing within its borders entirely, potentially forcing the company to shift production to other countries, complicating its ability to meet consumer demand.
It is unclear what specific actions China will take or whether the Trump administration will attempt to dissuade China from penalizing the company.
In a statement, PVH expressed its disappointment with the decision: “In our 20 years of operating in China and proudly serving our consumers, as a matter of policy, PVH maintains strict compliance with all relevant laws and regulations and operates in line with established industry standards and practices. We will continue our engagement with relevant authorities and look forward to a positive resolution.”
Tommy HilfigerIn 2023, China accounted for 6% of PVH’s sales and 16% of its earnings before interest and taxes. However, its manufacturing reliance on China presents a more significant risk. A
ccording to a company disclosure in December, China represents approximately 18% of PVH’s global production capacity, making it the largest manufacturing hub for the company.
“This has the potential to be very, very disruptive for PVH,” said Neil Saunders, managing director and retail analyst at GlobalData. “They would certainly have to scramble to find new capacity.
They’d be able to do that in time, of course, but the two things that are at issue are that, because a lot of supply chains are just in time, they would probably find that they did get short on inventory whilst they made the transition. The other issue, of course, is quality.”
PVH has been operating in China for over two decades. Although the company works with suppliers in more than 30 other countries, its higher-end goods require specialized manufacturing skills that may be difficult to replicate elsewhere, Saunders explained.
“While you can shift manufacturing capacity reasonably easily, it’s not so easy to guarantee the quality, guarantee the production processes. Those things take time to upskill,” Saunders noted.
“China has that capacity and has those skills, because PVH has been operating there for ages. Another country, another manufacturing facility, may not have those skills immediately.”
Additionally, PVH has viewed China as a key growth market. Now, the company must develop new strategies to drive sales and profitability as demand for its high-end apparel declines.
China’s unreliable entities list remains a relatively new legal framework, and experts describe it as intentionally ambiguous. While the government has wide latitude to act against PVH, its next steps remain uncertain. Typically, further guidance is issued within days of a company’s inclusion on the blacklist, Kaye said.
China could opt to blacklist PVH without imposing immediate penalties, but Kaye believes this scenario is unlikely, as it would undermine the government’s leverage.
Instead, China will likely use PVH as a bargaining chip in negotiations with the Trump administration and as a warning to other U.S. businesses with extensive operations and customer bases in China, such as Nike, Apple, General Motors, and Starbucks.
“There’s a sort of sword of Damocles hanging over [PVH’s] head, and that is exactly what this is, because this isn’t really about PVH at all. This is about PVH being caught in the spat between China and the U.S.,” said Saunders.
“China is using PVH as an example to say, look, if tariffs go ahead, if other restrictions are put in place on China, we can make life difficult for U.S. companies in the country. That’s really what this is about.”
