PVH Entangled in Trade War

Tommy Hilfiger is a unit of PVH, which has become caught up in a trade war with China. Photo: Robert Way/iStock by Getty Images

PVH Corp. (New York), owner of Calvin Klein and Tommy Hilfiger, has been placed on China’s “unreliable entities” list, which could force it to shut down stores, cease manufacturing and send its employees home, CNBC reports. China placed PVH on the list soon after President Donald Trump slapped a new 10% tariff on Chinese imports earlier this week.

PVH has a significant manufacturing footprint in China, with about 18% of its suppliers and factories in the region. Specifically, 128 of its 700-plus factories are in China, followed by 88 in Vietnam and 81 in India. (It has just one factory in the U.S.)

The “unreliable entity” designation allows the Chinese government to fine the retailer, prohibit import and export activities, revoke work permits, and deny employees the ability to enter the country, among other deliberately vague powers.

“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.,” Michael Kaye, a partner at Squire Patton Boggs, who has been practicing international trade law for more than 30 years, told CNBC. “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.”

In a statement, PVH said that it was “surprised and deeply disappointed to learn of the decision from the Chinese Ministry of Commerce.”

“In our 20 years of operating in China and proudly serving our consumers, as a matter of policy, PVH maintains strict compliance with all relevant laws and regulations and operates in line with established industry standards and practices. We will continue our engagement with relevant authorities and look forward to a positive resolution,” the company said.